
Class Hix_£CLi5 

Book._ \\l 

Copyright N° 



COPMRIGHT DEPOSIT. 



Gold Bricks of 
Speculation 



By 

John Hill, Jr. 

of the Chicago Board of Trade. 



A Study of Speculation and Its CounterfeitSj 
an Expese-'dithe Methods or Bucketshop 
and '^ Get-Rich-Quick" Swindles. 



Chicago 

Lincoln Book Concern 

1904 






LIBRARY of CONGRESS 
Two Copies Received 

JAN 9 1904 

. Copyright Entry 
CLASS^ ^ XXc. No. 
ioPY B' 



Copyright 1903, by John Hill, Jr. 



?tb(0 ISSOOft is Dedicated to the Legitimate 
Brokers who are Members of the Great 
Exchanges of the Country and to their 
patrons^ the Trading Public^ in the hope 
that it may serve to divorce forever in 
the public mind Legitimate Speculation 
from Gambling and Swindling. 



TABLE OF CONTENTS. 



Preface, - - - - - - - - 15 

PART I. 

The CouNTfiRFEiT OF Speculation. 

CHAPTER L 

BUCKETSHOPS, -------19 

The various phases of the bucketshop evil; how and why it is an 
insidious, dishonest and destructive gambhng game, depressing 
values of agricultural products and curtailing legitimate specu- 
lation ; avarice and ignorance responsible for the existence of 
bucketshops which thrive in spite of condemnatory statutes and 
court decisions. 

CHAPTER n. 

Bucketshop Methods, ----- 48 

Bucketshop methods, as explained by evidence and decisions in 
case of Board of Trade of City of Chicago vs. The Christie- 
Street Commission Co. (a bucketshop) ; by C C. Christie, "king 
of the bucketshop-keepers in the West "; and by correspondence 
showing how the "sucker" is induced to send his money to the 
bucketshop. 

CHAPTER HL 

The Bucketshopper, _____ 74 

My experiences with William Rodman Hennig, bucketshop-keeper, 
showing how far the accomplished confidence man will carry a 
" bluflf " and the tremendous influence which he can purchase 
with his ill-gotten gains, rendering it practically impossible to 
either break up his swindling game or to bring about his pun- 
ishment. 



viii TABLE OF CONTENTS 

PART 11. 
"Get-Rich-Quick'' and Investment Swindles. 

CHAPTER I. 
Introductory, -'- - - - - - 93 

How the mania to '' get-rich-quick " destroys ordinary caution ; the 
absurdity of the swindler's offers to make money for the pubHc; 
warning's and exposes do not check the swindles ; enormous 
losses borne by the people and how the funds are spent. 

CHAPTER 11. 
The E. S. Dean Co. Swindle, - - - _ 102 

Showing the expert circular writer's mission ; the way money can 
be " lost " ; the convenient mercantile agency ; how the " faker " 
is subject to blackmail, and how the innocent insist on being 
fleeced. 

CHAPTER III. 

History of the Eranklin Syndicate, - - 130 

Which demonstrates that the more ridiculous and unreasonable a 
scheme is, the larger the number of would-be investors it at- 
tracts ; that swindlers are in turn duped and robbed by their 
accessories ; and in which the question arises : '' Is the ' sucker ' 
a product of the rural districts or of the great cities ? " 

CHAPTER IV. 
Advance Information Bureaus and Brokers, - 140 

Showing how sharpers pretend to have knowledge for sale and how 
apparently sane persons try to buy this knowledge (for $5 or $10 
per week) which would be worth millions annually if it were 
iDUt five minutes ahead of the public's information. 

CHAPTER V. 
Advisory and Discretionary Brokers, - - 143 

How the " faker '' with an " absolutely safe system of speculation " 
will manage an account for a small percentage of the winnings,- 



TABLE OF CONTENTS ix 

and how it is possible for him to make his '' system " safe for 
himself and fifty per cent of his dupes. 

CHAPTER VI. 

" Pools," " Syndicates," " Combinations," " Mu- 
TUALS," Etc., - - - - - -150 

The old and thoroughly tried system of getting the people's money 
by claiming to form co-operative pools, to operate a never- failing 
method of speculation ; the promoter claims the wisdom of Solo- 
mon ; the dupe gets only wisdom in return for his money, 

CHAPTER Vn. 
Floating THE Stock OF Corporations, - - 155 

How the public and prominent citizens are duped by " promoters "; 
literary efforts of circular writers ; impossible promises and 
guaranteed dividends ; attacking savings banks and conservative 
investments. 

CHAPTER Vin. 

Turf Swindles; or, ''Playing the Races" and 
" BooKMAKiNG " BY Proxy, - - - - 183 

How the race-track gambler, following a calling condemned by 
statute, succeeds in getting funds from " suckers " ; vast sums 
squandered by the gullible public, first in gambling on the honesty 
of professed gamblers, and secondly in gambling on the gam- 
blers' ability to win money at gambling. 

PART in. 

The Tools of the Swindlers. 

CHAPTER L 
" Pake " Trade Journals, - - - - - 193 

How pretended financial journals boost swindling schemes; how 
they aid turf swindles ; Richard Oliver's methods exposed ; how 
men of his class are aided by reputable looking, but fraudulent 
trade journals. 



X TABLE OF CONTENTS 

CHAPTER 11. 

The '' Booklet," - - - - - -218 

The bucketshop and " get-rich-quick " brokers' httle book, which 
explains how to make money; when dissected by an expert, its 
plausible statements are shown to be absurd falsehoods ; the 
career of a St. Louis booklet. 

CHAPTER HI. 

The " Sucker " List, - - - - - 238 

How persons, who, by answering the " faker's " advertisement and 
thereby indicating a desire to '' invest," become objects of in- 
terest ; their names and addresses constitute a list, valuable for 
its possibilities. 

CHAPTER IV. 

The " Fake " Mercantile Agency and Other 
References, ------- 285 

Misleading the public by referring to Mercantile Agencies and Com- 
mercial Bureaus established to sell laudatory reports, regardless 
of facts ; two agencies exposed ; copies of their reports ; the 
truth as to persons reported upon. 

CHAPTER V. 

'' Fake " Banks and Bankers and How Refer- 
ences AND Financial Reports Are Sold, - 297 

Banks and trust companies as aids to swindlers ; selling bank refer- 
ences ; issuing '' fake " checks on a " fake " bank ; short life of a 
Chicago '' bank '' which advertised to sell references ; the mining 
exchanse as a side issue. 



*&' 



CHAPTER VI. 
The '' Convenient " Stock Exchange, - - 312 

Establishing a stock exchange for the purpose of protecting bucket- 
shop and " get-rich-quick " swindlers ; an expose of the methods 
of members of the Consolidated Stock Exchange of Philadelphia ; 
what they think of themselves. 



TABLE OP CONTENTS xi 

PART IV. 
Exchanges and Speculation. 

CHAPTER I. 
General Ignorance of Exchange Methods, - 339 

Exchange methods misunderstood and the reason therefor ; all 
future-delivery transactions similar ; public confused by the 
criticisms of persons with only a superficial knowledge of Ex- 
change methods ; enormous volume of farm products marketed 
through members of the Chicago Board of Trade. 

CHAPTER II. 
Commercial Exchanges, ----- 346 

Why Exchanges are established ; brief history of Chicago Board of 
Trade ; rules to protect the public ; value of strict discipline as 
demonstrated by increased business, value of privilege of mem- 
bership and self-respect of members. 

CHAPTER III. 

Chicago's Growth as a Grain, Provision and 
Seed Market (i 838-1 901), - - - - 360 

Volume of the products of the farm marketed in Chicago ; un- 
paralleled growth of the market as shown by receipts and ship- 
ments. 

CHAPTER IV. 
" Futures," _______ ^5q 

Their uses ; how they prevent speculation ; why and how they are 
settled without delivery ; when delivery is unnecessary ; how 
deliveries are made ; settlements ; settlement and delivery prices ; 
the Clearing-House. 

CHAPTER V. 
Speculation, --_-_-_ 3^8 

The morality of speculation ; impossible to define where speculation 
begins atid business risks end ; speculation in agricultural prod- 



xii TABLE OF CONTENTS 

nets reviewed and approved by Industrial Commission ; functions 
of speculation. 

CHAPTER VI. 

Speculation vs. Gambling, - - - - 418 

Definitions and comparisons ; they are separate and distinct acts ; 
service of the speculator to the farmer. 

CHAPTER Vn. 

Produce and Cotton Exchanges in Their Own 
Defense, - - - - - _ - 422 

Being extracts from protests and memorials to Congress by Ex- 
changes and Exchange members ; future-delivery contracts 
explained by those best informed as to their utility. 

CHAPTER Vni. 

Market Quotations; Their Uses and Abuses, - 438 

History of market quotations ; how used by legitimate brokers ; 
birth of the bucketshop ; efforts to prevent bucketshops ac- 
quiring quotations ; review of the Central Stock and Grain 
Exchange case ; quotations are the life of the bucketshop ; manu- 
facturing quotations ; Skakel's " tape game " ; counterfeiting 
the quotations of the Chicago Board of Trade and Minneapolis 
Chamber of Commerce. 



PART V. 

The Duties of Agencies For Good. 

CHAPTER L 
The Duties of the Exchanges, _ _ _ 465 

Why and how Exchanges should work to protect their reputations 
- and destroy swindling schemes based on their market quota- 
tions ; results in Chicago. 



TABLE Of CONTENTS xiii 

CHAPTER 11. 

The Duties of the Press, ----- 472 

Success of swindles depends on ability to purchase advertising 
space ; the editorial and the advertisement ; the press should 
guard the public ; the public should aid the press. 

CHAPTER III. 
The Duties of the Banks, - - - - 478 

How swindlers appeal to depositors in savings banks ; bankers 
should warn depositors ; communities suffer indirectly, when 
individuals are swindled. 

CHAPTER IV. 

The Duties of the Government, - _ - 486 

Inadequacy of the protection afforded the public at present ; fraud 
orders ; swindlers are bold ; punishment by fine a satire ; the 
inexhaustible corruption fund. 

Conclusion, __--_-_ 4^4 



I apologize to no man for what this book contains, as I have 
aimed to make it '' as harsh as truth and as uncompromising as 
justice." No honest man is injured, no thief is spared. 

The Author. 



PREFACE BY THE AUTHOR 



I do not deem it necessary to apologize for this book, 
either to the pubhc or to any of the many persons whose 
methods are herein exposed. Neither do I feel called upon 
to ask the pardon of those officers of the law who have 
failed to do their duty if I have usurped their functions, by 
exposing the methods of a class of vampires whose enter- 
prises differ in no w^ay from those of the highwayman or 
the burglar. I have long contended that if public officials, 
from the judge down to the policeman, did their whole 
duty, private individuals would not be compelled to devote 
their time and attention, either individually or collectively, 
to enforcing — or forcing the officials to enforce — the laws. 

I am one of those unpopular individuals who not only 
believe that our laws are good, but I also believe and insist 
that they should be enforced, even though their non-tn- 
forcement would swell the campaign funds, or enrich dis- 
honest office-holders. 

This book will show how mankind and womankind are 
bent on gain and how easily they become infatuated with 
the most unreasonable propositions if the proposition 
off'ers to enrich them. 

The success of swindlers in the guise of brokers, com- 
mission merchants, investment agents, etc., is largely due 
to a misconception on the part of the public as to what spec- 
ulation really is. 

The thrifty and speculatively inclined portion of the 
general public has been victimized for years by plausible 



xvi PREFACE 

rogues, without any systematic or intelligent effort being- 
made to warn and protect it, or to punish the thieves ade- 
quately. 

One object of this volume is to expose bucketshops, 
"get-rich-quick" brokers and other swindlers, to show the 
utter absurdity of their claims, and to reveal their criminal 
methods and their vicious characters. 

It has been necessary, in some instances, when dealing 
with dishonest schemes and their promoters, to adopt the 
nomenclature of the swindlers and gamblers, in order to 
name in their own terms their methods and the implements 
of their vocations. 

I have felt that by satirizing or ridiculing the schemes 
and schemers rather than by logical and dignified argu- 
ment, could a better understanding be reached of the irra- 
tional state of mind which seems to pervade the whole 
country, making it possible for the most visionary and 
ludicrous projects to succeed in finding persons willing to 
back them financially. 

The bucketshop-keeper and the grain and stock ^' get- 
rich-quick" broker are of the same species of swindlers, 
and it is difficult to make two classes of them, hence 
throughout the articles devoted to each there will be a 
commingling of the terms that is rather confusing but un- 
avoidable. If the "get-rich-quick" broker does anything 
approximating trading he bucketshops; while the bucket- 
shop-keeper off'ers special facilities and low rates of com- 
missions for his customers to "get-rich-quick." 

In every instance where I have used names they are the 
real names of the persons, firms or corporations whose 
methods I expose. All documents, letters and circulars 
quoted from or embodied in the various articles are either 
in my possession or in the hands of responsible persons. 



PREFACE xvii 

The material from which much of this expose of illegit- 
imate concerns was compiled was constantly accumulating 
and new^ phases of the "get-rich-quick'' situation arose 
from day to day. The developments after November i, 
1902, when the writer first conceived the idea of a publica- 
tion of this character and began its compilation, were 
numerous and sensational. This made it necessary to 
revise constantly, and to add to the articles up to about the 
middle of October, 1903, when the manuscript was placed 
in the hands of the publisher. 

Speculation and gambling, m the minds of a large per- 
centage of the public, are synonymous, for the reason that 
some gambling (as in bucketshops) is the counterfeit of 
speculation; while many think that some speculation re- 
sembles gambling, by reason of the modern facilities pro- 
vided by exchanges for the purchase and sale of stocks and 
bonds, and of farm products for future delivery. One 
mission of this book is to disabuse the public mind of this 
popular error by incontrovertible evidence. In the compil- 
ing of the work it has been necessary to illustrate, to quote, 
and to analyze systems and methods sufficiently to clear up 
this point in an unprejudiced mind. 

I do not propose to defend any sort of gambling, nor to 
endorse or encourage that reckless spirit of speculation 
which leads men of otherwise good business sense to em- 
bark in stock or grain deals without any knowledge of the 
business, but solely with the idea of emulating some suc- 
cessful man who has made a careful study of the markets 
and the laws that ultimately govern them. 

'' Reason must be our judge and guide in everything." — Locke. 

The presimiably well-informed classes do not hesitate 
to decry speculation of any kind, especially on boards of 



xviii PREFACE 

trade and stock exchanges. It is popular to do so — to fol- 
low along after the crowd. An hour spent in investigat- 
ing w^ould reveal to the more intelligent persons their 
error, and they would thereafter be strong advocates of 
the present system of trading on the exchanges. If the 
pubhc can be made to understand the functions of specula- 
tion, swindles will disappear for lack of "suckers" and as a 
result of aroused public sentiment. 

Persons desiring to speculate or invest can avoid buck- 
etshops and " fake " brokers by making a preliminary and 
independent investigation into the character of the broker 
and the merits of the enterprise. If they accept the state- 
ments and references of promoters of the schemes, without 
making such investigation, they are not entitled to sym- 
pathy if they are robbed. 

Legitimate and honest brokers do not resort to sensa- 
tional advertising; they do not guarantee profits; nor do 
they solicit funds to invest on their judgment. The func- 
tions of a broker or commission merchant are to receive 
and execute the orders of his customers. When he ofifers 
to do more (except in the way of giving market news, ad- 
vice, or conservative opinions) he should be avoided. The 
promoters of pools, syndicates, etc., and the disseminators 
of advance information should be left severely alone. 

I hope that this book will make the difference between 
legitimate and illegitimate methods so clear that the reader 
will not be duped into buying any of the " Gold Bricks of 
Speculation." 



PART 



The Counterfeit of Speculation. 



CHAPTER L 

BUCKETSHOPS. 

The various phases of the bucketshop evil ; how and why it is an 
insidious, dishonest and destructive gambUng game, depressing 
vakies of agricultural products and curtailing legitimate specu- 
lation ; avarice and ignorance responsible for the existence of 
bucketshops which thrive in spite of condemnatory statutes and 
court decisions. 

One of the motives behind this book is my desire to 
clear away the cobwebs of doubt that for years have ob- 
scured the public vision and have prevented the intelligent 
masses from distinguishing between the real and the un- 
real in speculation ; between the legitimate broker and ex- 
change member, and the conscienceless bucketshop shark; 
and between the bona Me broker's office, from which the 
orders given by the customers of the office are sent to the 
great exchanges of the country to be executed in a legiti- 
mate manner, and the pretended broker's office where a 
notation on a sheet of paper records the bet of the cus- 
tomer with the proprietor. 

" All trades and places knew some cheat. 
No calling was without deceit." 

While the bucketshop is a place wherein, under the 
guise of trading, bets are laid on the future course of the 

19 



20 GOLD BRICKS OF SPECULATION 

markets on the exchanges of the country, the arguments 
advanced and the disguises assumed by the bucketshop 
are so varied and clever that for twenty years it has suc- 
ceeded in holding public opinion suspended as to its real 
character. 

There is no room for doubt as to the character of the 
bucketshop. It is a gambling den, and nothing else. It is 
generally a dishonest gambling den, for there are few, if 
any, bucketshops whose frecjuenters have fair treatment. 
The patron puts his money into the pretended purchase or 
sale of stocks, grain or other commodities, at prices posted 
on the blackboard, which are, or purport to be, the figures 
at which securities or commodities are selling on the floor 
of the stock or produce exchanges. He bets that the price 
will vary in his favor before it will go one point against 
him. But almost invariably the quotations are manipu- 
lated or held back long enough to make him place his bet at 
a disadvantage, and wdien the price of the article on which 
his bet has been made approaches the figure at which his 
trade will '' freeze out " and his stake be confiscated, it is 
customary for the bucketshop to use every agency it can 
command to force the market in that direction sufficiently 
to make him lose. 

Thus, in defiance of law and decency, the " future- 
delivery '' transactions on grain and cotton exchanges and 
the cash transactions on the stock exchanges have been 
counterfeited in bucketshops, with disastrous results to the 
reputation of exchanges and legitimate brokers and com- 
mission merchants. Every man or woman who has been 
robbed in a bucketshop has posed as the victim of a board 
of trade or stock exchange, and their experiences are cited 
as horrible examples and conclusive evidence of the harm- 
ful moral and social effects of speculation; when, in fact, 



BUCKETSHOPS 21 

both loss and harm resuUed, not from speculation, but 
from betting as to what would or would not occur on the 
New York Stock Exchange, or on the Chicago Board of 
Trade. For bucketshops have no connection with legiti- 
mate exchanges. They buy from the telegraph companies, 
or steal by tapping wires, the ({notations of the leading 
exchanges, and these they post on 1)lackboards as the 
basis of the bets made in their shops. Quotations are the 
one thing absolutely essential to the existence of a bueket- 
shop. The nionient quotations cease coming in, betting 
stops and the bucket shop is out of business. 

The deeper I carry my investigations into the realms 
of bucketshopism, the more astonished I am that the na- 
tion, particularly that portion of it which is interested in 
maintaining the values of the products of the farms, should 
tolerate these wreckers of values and pirates of commerce. 

Yet, strange as it may appear, the branch offices of 
the bucketshop prosper best in the smaller towns of the 
great agricultural States. While the whole scheme is one 
that should call forth public protest, especially from the 
agricultural classes, its novelty in a small community 
where entertainment and excitement are lacking, draws all 
classes to the counterfeit " board of trade." Men who 
never dreamed that they could enjoy the luxury of specu- 
lation, now have offered to them the opportunity to do so 
with a ten-dollar bill, and imagine that they are speculating 
in the same manner as is their more fortunate neighbor, 
who, with his liberal capital, has been dealing in grain or 
stocks for years through legitimate channels. 

Gradually the patronage of these " boards of trade " 
grows, public excitement and interest increase, men be- 
come involved in losses and ''plunge " to win back what 
they have already lost, only to lose more, and finally, when 



22 GOLD BRICKS OF SPECULATION 

all of their money has been juggled into the pocket of the 
" head " bticketshop-keeper at Chicago, St. Louis, Kansas 
City or Minneapolis, they awaken to a realization of their 
folly. One l)y one the duj^jes are fleeced, paying in $5 or 
$10 at a time. Tliey have 1)een l3etting with the bucket- 
shop keeper ; they have l)een made victims of the counter- 
feit of speculation, — the 1)ticketshop. They quit with de- 
pleted purses, btit with hearts full of malice for l3oards of 
trade and stock exchanges, ui)on which they never had had 
a transaction. 

It is easy to gamble on market quotations. The bucket- 
shop keeper will accept $10 bets, hold the stakes himself, 
and charge in some cases, as in stocks, 25 per cent for the 
accommodation, and then shuffle the market quotations so 
as to show the trusting " rube " that he is '' froze out," — 
that he has lost. 

AA'ithin the period when bucketshops held sway in 
Iowa, from 1894 to 1898, there were many notable exam- 
ples of the way in which the branch office of a bucketsliop 
could, in the language of the owner, " clean up a town"; 
get all the money there was in circulation, and then close 
up, to repeat the game in some neighboring town that 
waited to be '' worked." 

In the early part of 1897, at the urgent reqtiest of a 
number of citizens (some of whom were victims) of an 
Iowa village of two thousand inhal)itants, I took docu- 
ments and witnesses from Chicago to present to tlie Grand 
Jury of the county in which the village was located, for 
the purpose of procuring the indictment of the owners of 
the bucketshop in Chicago, whose private wires reached 
from Chicago to the ]\Iissotiri River and connected with 
branch bucketshops in about twenty-five intermediate 
towns (among them the town I visited) in Illinois and 



BUCKETSHOPS 23 

Iowa. All *' business " was sent to the head bucketshop at 
Chicago by means of the private wires, and each day the 
wannino's were remitted to the Chica^'o office. 

I was compelled to remaiil in the town for several days, 
and was thus enabled to make an exhaustive investigation 
into the methods adopted by bucketshops to " clean up " a 
town. The consequences resulting to this community from 
the harboring of this bucketshop were startling and costly. 
It developed that the bankers and store-keepers had for 
some time felt a decrease in their business. The deposits 
in the bank fell off ; the cash trade over the store counters 
shrunk to insignificance. The scarcity of money in the 
town attracted attention and was discussed on the street 
corners. Finally, some person suggested that for half a 
year the local branch office of the bucketshop had daily been 
sending money in large sums to headquarters in Chicago. 
The matter was investigated. It developed that this little 
side-street office, with furniture consisting of a table, a few 
chairs and a blackboard, had absorbed $35,000, — prac- 
tically all the circulating currency of the tow^n, and had 
created a local panic. 

In 1898, except from the river towns, the Iowa author- 
ities drove the bucketshops out of the State. 

I noticed, however, that in the early months of 1903, 
two St. Louis bucketshops and an Indiana bucketshop were 
extending their "wires" into the center of the State; 
unless checked, thev will build a web of wares that will 
again illustrate to the people of Iowa the tragic fable of 
the spider and the fly. 

In urging the passage of a bill, introduced by Senator 
Gjertsen in the ^Minnesota Senate on March 11, 1903, to 
prohibit bucketshopping in that State, the Northwestern 
Miller (March 18, 1903) said: 



24 GOLD BRICKS OF SPECULATION 

"It is not in the great cities that the bucketshop does its most 
helHsh work, though there its result is pitiful enough, heaven knows. 
To the gaudy city office of the bucketshop robber, come the broken 
down votaries of chance, whose company would be spurned from 
the doors of a decent gambler. Th.e poor wrecks who have bor- 
rowed or stolen a few dollars with which to minister to the desires 
of the infatuation which has ruined them ; the husbands of hard- 
working women, who have cozened their wives into trusting them 
with the payment of a gas bill, or a grocer's book — the fathers of 
boys whose small savings they have slyly appropriated ; such as 
these are they who covertly glide into the side and back doors of 
these establishments and there hazard their poor store of ill-gotten 
money — blindly trusting to the man in the private office wearing the 
diamonds and smoking the expensive cigars for a chance of profit. 
Feverishly, furtively, they try the ever-losing game and the operat(M" 
in his corner plays with them as the cat with the mouse, skillfully, 
ruthlessly, sometimes giving them small winnings to encourage them 
to return again with more borrowed or stolen money, until at last 
they disappear, leaving all they could borrow, beg, earn or steal, in 
the safe of the bucketshop.'' 

The man who tries to beat a bucketshop has an impos- 
sible task before him. Take, for instance, the $io stock 
trade, Avhich is the most popular deal among the patrons 
of bucketshops ; — could there be a more insane bet on the 
part of the patron ? He steps up to the order window, pays 
in $io and '' buys," say, ten shares of American Sugar at 
$1 lo a share. If Sugar declines % of a point,— to $109.25, 
— the patron loses his $10, the 25 cents being the commis- 
sion charged by the bucketshop. Sugar must advance to 
$111.25 in order that the patron may win $10 from the 
shop after paying the 25 cents commission. 

I am not an expert in figuring the percentages in games 
of chance, but it looks to me as if the fool patron was 
betting even money with the keeper, that Sugar would 
advance $1.25 a share before it would decline 75 cents a 
share ; in other words, the keeper has 50 cents a share the 
advantage of the patron on a bet involving a fluctuation 



BUCKETSHOPS 25 

in the stock market of 75 cents on one side and $1.25 on 
the other, or a total of $2, so that the '* sucker " starts out 
by giving an advantage of 25 per cent to the keeper. 

Or, it might be more correct to figure it in this way: 
the stock must advance $1.25 a share to permit the patron 
to make as much as he woukl lose on a decline of 75 cents 
a share, the advance being 166 2-3 per cent of the decline. 
It is a question in my mind on a deal of this kind (and 
there are probably more of these deals than of any other 
in bucketshops) if the keeper has not really a 66 2-3 per 
cent advantage. This I shall leave for the mathematicians 
to work out. 

Except for the exhilaration which so beautiful a bet 
must furnish his patron, the keeper of the bucketshop per- 
forms no service. He earns nothing. His gains, if there 
be any, are simply taken out of the pocket of another man 
and put into his own. 

As the sustaining of the values of farm products is of 
vital interest to rural communities, it would seem that 
farmers would support in every way any plan to eliminate 
bucketshops; for, besides the demoralizing influence 
which their dealings have on the participants, they also play 
an important part in the price movement of farm products 
on legitimate exchanges. Their depressing influence has 
been felt especially in the grain and cotton business, as 
almost all i:)atrons of bucketshops take the "long" (or 
buying) side of the market, when, if, instead of betting 
with the '' keeper," they were making purchases through 
legitimate channels, their purchases would enhance values. 

In this connection the Coinmcrcial West of Minne- 
apolis has said : 

" The practice of biicketshopping debauches public morals, de- 
presses the price of agricultural products, and forces the entire grain. 



26 . GOLD BRICKS OF SPECULATIOX 

trade either to adopt ' sharp ' methods or give np their business to 
the bucketshops." 

Furthermore, the hucketshop, to a greater or less 
extent, deflects from legitimate markets the buying force 
of a vast volume of speculative purchases, — destroys, as it 
were, a portion of the sustaining power which speculation 
is called upon to exert in order to maintain reasonable 
prices and prevent undue depression, particularly at the 
time immediately following harvest, when the farmer has 
a year's supply to sell to the world. But of this supply, 
the consumer desires only enough to provide for his neces- 
sities for a day, or a week, or, at the most, a month. The 
more speculative buying for future delivery there is con- 
centrated on the legitimate exchanges, the higher is the 
price paid to the producer. 

This fact was illustrated by the celebrated Leiter wheat 
deal, which advanced the price of wheat the world over. 
Mr. Leiter's transactions benefited all the farmers of the 
country. He went upon the great exchanges and bought 
a large quantity of wheat, believing that he could sell it 
later at greatly advanced prices. It was a legitimate specu- 
lation on his part. But suppose his transactions had been 
confined to bucketshops; then they would have had no 
effect whatever upon the market, and the whole afTair 
would have been nothing more than a throwing of dice 
or a pitching of coppers for the money at stake. The one 
transaction is a legitimate although speculative business 
operation, such as is recognized the world over ; the other 
is a mere gamble as to what other men may or may not do 
to affect the price of wheat. 

The difference between board of trade and bucketshop 
transactions is as wnde as the poles asunder. Boards of 
trade and produce exchanges are great markets where 



BUCKETSHOPS 27 

the farm products of the country are deaU in, where buyer 
and seller meet, where vast amounts of property are trans- 
ferred from the producer to the consumer, and prices are 
established. Without the machinery of the exchanges it 
would be impossible to ^^ a reasonable uniformity of prices 
or to distribute the farm products of the country in a sat- 
isfactory manner. Undoubtedly a vast amount of specula- 
tion is done on the exchanges, but it is not only done in a 
legitimate way, but also has an immediate effect upon 
prices. 

Take, for instance, the transactions in wheat. Who- 
ever deals on the exchanges in that article goes into the 
open market and helps, in proportion to the volume of 
his business, to make the price. His dealing is a factor 
in the market. 

But the counterfeit of these exchange transactions, as 
carried on in a bucketshop, has no more influence on the 
price or on the market than has the chalk with which the 
marker puts the price on a blackboard. 

The person who cannot see the moral as well as the 
business difference between exchange and bucketshop 
transactions can hardly be said to have much perspicuity 
in anything. 

The Chicago Tribune, speaking editorially on this 
phase of the bucketshop evil, said: 

'' The bucketshops do not aid in the movement of produce from 
the producer to the consumer. They neither buy from the one nor 
sell to the other, nor do any of the transactions in the bucketshop 
belong to either category of ' business.' On the contrary, the whole 
of the alleged buying and selling of the bucketshop is nothing more 
or less than a lot of bettings by the customer with the ' proprietor ' 
of the institution that the prices paid by actual dealers on ' Change ' 
will or will not touch certain named figures, or pass them, before 
the lapse ot a time stated in the ' contract ' in each case. The buck- 



28 GOLD BRICKS OF SPECULATIOS 

etshops and .their patrons have no more to do with buying from the 
producer or selhng to the consumer than the swarm of flies around 
a barrel of sugar has to do w'ith the transfer of the contents from 
the possession of the merchant into the cups of tea or coflfee on the 
breakfast table." 

The spread of bucketshop gambling throughout the 
country has been so rapid and the attending resuUs so 
marked that the Chicago Board of Trade, the New Orleans 
Cotton Exchange, the Milwaukee Chamber of Commerce 
and the New York Cotton and Produce Exchanges have 
adopted l)y-laws prohibiting their members from in any 
way recognizing the bucketshop-keeper in an exchange 
transaction, and the member is subject to expulsion from 
the exchange, who handles orders on tlie exchange for 
the keeper of a bucketshop, or who in any way lends assist- 
ance to him in his nefarious calling. The bucketshop- 
keeper s are outcasts — usually pool-room sharks or '' sure- 
thing " card men — with no standing in the business or 
social world. But, as some ])right mind has suggested, 
'' the w^orld does not stop to examine a man's tracks after 
he ' gets there,' " and the bucketshop keeper who can 
" flash a bank-roll," ^ no matter whether it is his own 
money or the money which his dupes have placed in his 
hands as '' margins," can hold the world at bay, can defy 
the law and rely on his attorneys, can buy whole pages in 
newspapers and flaunt his purchased powers in the faces 
of honest men. Such is the power even of stolen money. 
All of these things it can buy. 

One sometimes wonders if avarice is our national curse. 



* A " bank-roll," in the parlance of gamblers and swindlers, is the cash 
capital put np by the backers of the game, to he displayed in order to inspire 
confidence, to meet possible reverses, to buy protection and to install the 
necessary paraphernalia of the game. To "break the bank," is to win all of 
the gambler's "bank-roll," or as much of it as he will stand to lose before 
he is willing to announce that " the bank is broke." 



BUCKETSHOPS 29 

Does it explain as many of the sins of omission as it does of 
commission? Does it explain why "eminent citizens" 
close their eyes to the moral side of a question, while the 
'' bank-roll " is on the immoral side, even though the 
'' bank-roll '' is made up of the proceeds of embezzlement 
and defalcation augmented by the pittances which repre- 
sent homes despoiled of necessary comforts? 

Let us see. 

Minneapolis provides us with the most noteworthy 
instance at the moment. She has a bucketshop, the Coe 
Commission Co., George J- Hammond, president and 
manager. The officers of the concern have stipulated in 
court that the Coe Commission Co. is a bucketshop. They 
do not deny the fact nor try to disguise it. But they have 
" $300,000 capital and surplus," according to their adver- 
tisements. Further, they refer to sixty National and State 
banks and print the names and locations of these institu- 
tions. According to the map which they publish, their 
" wires " extend from New^ York and Boston to Spokane, 
Washington, and Portland, Oregon. They insert full-page 
advertisements in Minneapolis and St. Paul papers, and 
post the following notice in their offices: 

NOTICE. 

The quotatiorxS sent out by the Coe Commission Company are 
official, and can be verified by the records of the exchange on which 
they are made. Care should be taken to note the exact time each 
order is sent. 

This company will cheerfully adjust any errors that may be 
made. 

The quotation service and the execution of orders by this com- 
pany are guaranteed to he better than any other concern in the busi- 
ness. 

If you have an open trade or account with us you can have 
orders executed against it in any of our seventy-five offices. 

The Coe Commission Company. 



30 GOLD BRICKS OF SPECULATION 

This concern has grown so that its wires cross half a 
dozen States, and the number of its offices exceeds one hun- 
dred. It is a successful bucketshop, for the reason that it 
has a '' bank-roll " made up of its own or its patrons' 
money. 

The " bank-roll '' speaks through the columns of news- 
papers. It defies the legitimate brokers, millers and ex- 
changes. Its boldness excites the admiration of the 
thoughtless, who rush to the '' seventy-five branches " to 
hand in their money, w^hich is immediately telegraphed to 
headquarters to swell the " l)ank-roll " — to give power and 
immunity to George J. Hammond, which he can enjoy only 
so long as the '' bank-roll " buys it for him. And the Coe 
Commission Company is simply another name for George 
J. Hammond; for when the Coe Commission Company 
was established two or three years ago, Hammond was 
timid; he did not like to use his own name; he had not 
tested as yet the magic efifect of a " 1:)ank-roll " on the 
people of the Northwest; he did not know its efficacy. 

Then, again, the name of George J. Hammond was 
nothing to be proud of, as the Chicago papers had informed 
the people of the country that a man had carried that name 
away from Chicago, together w^ith the funds of a '' get- 
rich-quick " concern know^n as the Combination Investment 
Company. The money, the man, and the name had dis- 
appeared betw^een two days of December, 1899. Ham- 
mond was president of the Combination Investment Com- 
pany, and, as such, probably assumed that he had the right 
to the assets. He tried to get them all, but a lucky accident 
saved the creditors 8 per cent, as shown by the following 
from the Chicago Tribune (March 7, 1901) : 

" A final dividend making a total of 8 per cent has been declared 
among the creditors of the Combination Investment Company, an 



BVCKETSHOPS 31 

alleged ' get-rich-qiiick " concern, against which proceedings in hank- 
ruptcy were begun in the United States District Court several 
months ago. The claims of more than 1,200 creditors amount to 
close to $280,000, and to meet these demands the receiver had only 
about $25,000 assets." 

Intrenched behind the " bank-roll," Hammond, alias 
the Coe Commission Company, sits in the New York Life 
Building, ^linneapolis, Minnesota, and, with the aid of 
numerous accessories (everyone of whom has an avaricious 
eye constantly fixed on the " bank-roll "), he hurls defiance 
in the face of decency and casts his lines out daily for a 
fresh catch of *' suckers " who contribute their mite to 
the " bank-roll,'' which must be replenished each day in 
order that Minneapolis and the great Northwest may con- 
tinue to enjoy the society of the '' eminent " ex-president 
of the Combination Investment Company of Chicago. 

But there is a turn in the tide of every bucketshop's 
life which cannot be checked and which leads on to ruin, 
and it comes when the accretions to the " bank-roll " fail 
to equal or exceed the excessive and varying demands of 
the keeper's accessories. Let us '' watch and wait." George 
J. Hammond of Minneapohs is the same gentleman, a little 
emboldened by the success of his heartless enterprises and 
his immunity from punishment, who less than four years 
ago shook the dust of Chicago from his feet, with the 
'' bankroll " of the Combination Investment Company in 
his inside pocket. 

Let us watch the fate of the '' bank-roll '' of the Coe 
Commission Company. 

There is little of news in a review of Hammond's 
career. The XortJnvesfern Miller and other publications 
have exposed his various schemes, but the people of the 
Northwest are so sorrv^ for Mr. Hammond and so fearful 



32 GOLD BRICKS OF SPECULATION 

that he may leave them as he did Chicago that, with each 
expose, his " business " apparently increases. As Ham- 
mond's profits are made up entirely from the losses of 
patrons of his various branches, the good, kind people of 
Minnesota, the Dakotas, Wisconsin, Montana and a few 
other States are contributing millions of dollars to support 
a scheme that differs none in principle from the selling of 
'' gold-bricks " or " green-goods." 

I mentioned earlier in this article that in small com- 
munities the bucketshop branch office enjoyed the favor 
of a novelty. The statement is borne out by the following 
items clipped from newspapers of Minnesota, AVisconsin 
and Montana. Incidentally, they also show how a bucket- 
shop is assisted by the press in its efforts to " clean up a 
town." 

MORE BROKERS COMING. 



Minneapolis Commission Firm Has Applet on on List for Branch 

OMce. 
The Coe Commission Company, of Minneapolis, the largest 
" bucketshop " house in the world, is about to invade Wisconsin 
cities, says the Stevens Point Gazette. It is contemplated to estab- 
Hsh offices at Eau Claire, Marshfield, Grand Rapids, Neenah, 
Menasha, Appleton, Manitowoc, Oshkosh, Fond du Lac, Waukesha 
as well as at Racine and Kenosha and other points between Mil- 
waukee and Chicago. The Coe Commission Company has been in 
existence for over four years, and has a capital of $300,000. (Post, 
Appleton, Wis., Jan. 8, 1903.) 



Louis P. Sichler says interest in trading on the " Red Lodge 
stock exchange " is increasing each day, and the Coe Commission 
Company is well satisfied with the establishment of a branch office 
here. As predicted. Amalgamated Copper, Sugar, and Missouri 
Pacific have proven exceptionally good '' buys/' and several have 
taken out good profits on small investments. In fact every stock 
listed on the Red Lodge board has had a bullish tendency. All of 



BUCKETSHOPS 33 

the local traders have so far been " long." {Picket, Red Lodge, 
Mont., Jan. 2, 1903.) 



B. I. Stovel, representing the Coe Commission Company, has 
opened an office over the Citizens' State Bank v^here investors can 
find a place to dispose of their cash and those who have grain or 
stock for sale can learn the latest cash prices as well as the options. 
This is doubtless the strongest commission firm in the United States 
and we are glad to see a branch established here. (Gazette, Slay- 
ton, Minn., Jan. 9, 1903.) 

But, happily, the opinions of editors differ as to their 
duty; their experience and knowledge of affairs are likely 
to vary; this is brought forcibly home to us by the con- 
trast between the clippings just quoted and an editorial 
taken from the Perry, Oklahoma, Times of June 2^, 1902, 
and w^hich reads as follows : 

'* We have received a circular from a bucketshop firm in Chicago 
in regard to their business. We have a bucketshop right here in 
Perry and if we were inclined to gamble any in this line would 
support home industries, as the Perry bucketshop can as readily 
chamber all funds going into their capacious maw as the Chicago 
contingent. The bucketshop at home or abroad is a festering sore 
on legitimate business and breeds disgrace and poverty to its 
patrons. Shun it as you would a plague." 

Now it may be that the editors of the Post, the Gazette 
and the Picket were unaw^are of the harm to their readers 
that Hammond's branches would work. Possibly they had 
never heard of the Combination Investment Company, or 
it may be they did not recognize George J. Hammond under 
the alias of The Coe Commission Company. Their mem- 
ories could hardly be expected to carry them back to the 
days of our war with Spain in 1898, when an Indiana 
farmer, believing Hammond to be a Spanish spy, captured 
him and lodged him in jail. They are excusable for not 
recognizing in The Coe Commission Company one of the 



34 GOLD BRICKS OF SPECULATION 

heroes of the Indian^i episode, which was described in the 
Chicago Record of May 4, 1898, as follows: 

Terre Haute, Incl, INlay 3. — A farmer a few miles from the 
city came upon two wire tappers just in time to prevent them from 
making a big draft on the cash box of Bookmaker Stubblefield at 
Evansville. The farmer saw the wire connection and thought the 
men were Spanish spies. He sent word to that effect to the Sheriff, 
and while the latter was on his wa}- to the place he met several 
farmers bringing the suspects and a colored man who had been 
their driver to the city. 

The wire tappers are O. M. Stone and G. J. Hammond of Chi- 
cago. They tapped the through New York race report wire last 
Friday and beat a local pool-room out of $700. They were in the 
act of fixing the report to catch Stubblefield for several thousand 
dollars at the time the farmers interrupted them. Their scheme was 
to stop the report and send a code word over the wire which Burley 
Stevens, a former Chicago and Eastern Illinois conductor, and who 
is a telegrapher, read from the instrument in the poolroom. He 
told a confederate the name of the winning horse and the confeder- 
ate bet the money. The wire tappers then sent along the race 
report. A week ago the wire tappers received the telegraphing 
outfit from W. A. Graham. Chicago, and paid $190 on delivery. 

Chief Colleran telegraphed to-day as follows, from Chicago: 
*' Stone is one of the best wire tappers known. Hammond is his 
partner. Have been in similar trouble before, but never convicted. 
They are bad men." 

Both men are in jail. Stevens and Cortner, the local confeder- 
ates, who were in Evansville to do the trick there, will have a hear- 
ing to-morrow. 

I might carry the reader still further back to the time 
when Hammond was an '' Advisory Agent," with an office 
in Room 416 Medinah Building, Chicago, when his adver- 
tisements, instead of occupying full pages, were confined 
to half an inch space in the '' business chances," and read: 

A FORTUNE IN WHEAT. 
For inside information of bull pool in wheat address HamrHond, 
416 Medinah Bldg., Chicago, 

or, 



BUCKETSHOPS 35 

FORTUNE IN WHEAT. 
My inside advices are making fortunes for clients in Wheat and 
Stocks. For particulars address 

Hammond, 416 Medinah Bldg., Chicago. 

When his terms for '' inside information " were $5 
a week, or $15 a month, and while promoting this scheme, 
he was publicly whipped for making too free use of the 
names of persons who did not even know him. 

But enough of Hammond, the expensive luxury of 
whose society the great States of the Northwest are wilhng 
to retain. So long as the people furnish the '' bank-roll," 
Hammond will stay. 

An apology is due to some citizens of the Northwest 
for certain general remarks indulged in by the wTiter. 
There is a small coterie of gentlemen at Minneapolis and 
St. Paul who have unhesitatingly condemned and exposed 
Hammond's methods. To them I wish to apologize, and I 
wish to assure them that past experiences convince me that 
when the final reckoning comes, as it always does, either 
Hammond or his " bank-roll '' or Hammond and his 
" bank-roll " will not answer at roll-call. 

There is a gentleman at Fargo, North Dakota, to whom 
I wish to apologize, not only for my general remarks about 
the Northwest, but also because I am going to submit his 
correspondence with a Chicago bucket shop or " get-rich- 
quick " shark. These letters are printed to show that 
there are '' wise men of the West " as well as " wise men 
of the East." 

The Chicago faker's letter had the name and address of 
its writer tastefully lithographed at the top of the page, 
and read: 

" 1 understand there are times when you are interested in 
speculation. If at any time you are, I would be glad to serve you. 



36 GOLD BRICKS OF SPECULATION 

I do a strictly commission business. I am always looking after the 
interests of my customers, as it is to my interest to do so. I have 
a system to work the Board of Trade which has proved to be a suc- 
cess ; at least it has shown a profit of $i a day on every $ioo in- 
vested and has done this for two years, and we have had some very 
wild wheat markets during that time. One dollar per day is a big 
thing, and you can't find anything to equal it wdien you double up. 
Here are a few figures to show what you can make on $ioo: 
$1 per day for loo days, $ioo; $2 per day for 100 days, $200; 
$4 per day for 100 days, $400; $8 per day for 100 days, $800. 
This makes you $1,600 in 400 days, less the commission, which is 
20 per cent. You can keep right on doubling up ; you can close 
at any time or draw a part or all your money. If you have the 
money to spare at all you can't make a better investment or any 
safer than this one is. I am the only broker in Chicago that has 
this system, for I worked it out myself. I have spent a great deal 
of time and money to be sure I was right. Now I can show the 
reports and prove I am right. Reference or any information regard- 
ing the Board of Trade is furnished upon application. Hoping that 
you will favor me with an order at once and oblige me." 

To this alluring communication the Fargo man re- 
plied : 

" We were honored yesterday by receiving your valued con- 
tribution of the 26th inst. In it you assure us that you are always 
looking after the interest of vour customers, as it is to vour interest 
to do — that is evidence positive that you are a philanthropist ; 
no common, ordinary, every-day bucketshop shark or tin-horn gam- 
bler, but a Simon pure philanthropist who beams benevolence and 
sweats sympathy and shekels for his fellow-man. If I hadn't your 
solenin announcement that you did nothing but a ' strictly commis- 
sion business ' I might have been tempted to believe that you had 
come to North Dakota streams to fish for suckers and had taken me 
for one. But when I read on and find that you propose to make 
$1,600 for me in 400 days I feel abashed and ashamed to remember 
that I for a moment could have been suspicious of your sincerity. 
Not only do you promise to give me $1,600 but you naively add 
that ' I can keep right on doubling up.' Now I like the idea of 
' doubling up ' ; it is such a comfortable suggestion, and it further 
shows that, while there are men in vour line of business that bleed 



BUCKETSHOPS 37 

gall, yet that you, if a knife were inserted under your fifth rib, 
would send forth only blood, royal, red, sanguinary blood. 

" Public benefactors are so scarce these degenerate days that I 
can scarcely find adequate words to fitly express my admiration for 
a man who has ' spent a great deal of time and money to be sure he 
was right,' solely and only that he might, like King David of 
sacred fame, corral great chunks of prosperity for the fellow who 
would only have faith like a grain of mustard seed in his ' system.' 
Mr. Little, you should ask the legislature of the State of Illinois to 
change your name. There is nothing little about you but your 
cheek, and your audacity matches your facial ornamentation. I am 
going to send your letter to a friend of mine on the Board of Trade 
for perusal. I don't suppose it will be regarded by him as a novelty, 
for I am told that your breed of excrescences are found not only in 
Chicago, but in New York, and that many of your kind are sojourn- 
ing at Sing Sing and Bloomingdale, having probably made a miscue 
while pushing their system. jNIr. Little, you will have to cast your 
line, when angling, in other waters. You will have to go farther 
west ; the average North Dakotan is sometimes green, but never 
an imibecile. 

'' Fellow\s of }our caliber don't fool us for a holy minute, and 
it is a reflection upon the intelligence of every cow-boy in the North- 
west that you should have had the impertinence to commit to the 
mail pouches of our L^ncle Samuel pointed in this direction such a 
letter as the one* before me. 

" Farewell ; a long, last farewell, 
Your wiles no longer play. 

Our suckers have all gone to 

And you're not in it to-day." 

I have frequently been requested to define bucketshops 
— a most difficult task, owing to the variety of disguises 
which they assume and the outward similarity which they 
bear to legitimate brokerage houses. The following defini- 
tion covers the essential features of bucketshops from the 
standpoint of an expert : 

A BUCKETSHOP is an establishment conducted 
nominally and ostensibly for the transaction of a grain, 
cotton or stock exchange business. The proprietor, with or 



38 GOLD BRICKS OF SPECULATIOX 

without the consent of the patron, takes one side of every 
deal that is made in his i)lace, the patron taking the other, 
no article being bought or sold in any public market. 
Bucketshops counterfeit the speculative trading on ex- 
changes. Continuous market qtiotations of an exchange 
are the essence, the very sinew of the gambling Imsiness 
carried on in a bucketshop, they being tised as dice are 
used, to determine the result of a bet. 

The market quotations posted in a bucketshop are 
exactly similar to those posted in a legitimate broker's 
office, but they are displayed for a different purpose. The 
broker posts the quotations for the ptirpose of showing 
what the market has been on the exchange, as a matter of 
news. The bucketshop posts them as the terms tipon which 
its patrons may make bets with the keeper. A bucketshop 
is destroyed if it loses its stipply of quotations. 

The margins deposited with the bucketshop proprietor 
by the patron are nothing l)ut the patron's stakes to the 
wager and are appropriated by the proprieJ:or when the 
fluctuations of the price on the exchange, whose quotations 
are the basis of the bet, reach the limit of the deposit, one 
party (the proi)rietor) to the bet acting as stakeholder. 
The commissions charged by the bucketshop-keepers are 
odds in its favor, and necessary in order to maintain their 
pretense of being legitimate brokers making the transac- 
tion on an exchange. 

The bucketshop proprietor is ready to make all deals 
offered in any commodity that fluctuates in price. He may 
call himself a banker and broker, or a commission mer- 
chant, or disguise his business tinder the form of an incor- 
porated enterprise or exchange. But he is still a common 
gambler. The interest of the proprietor of a bucketshop 



BUCKllTSllOPS 39 

is at all times opposed to that of his patrons, as the profits 
of the shop are measured by the losses of the patrons, 

Bucketshops should not be confounded with the great 
public markets of the world, where buyer and seller, pro- 
ducer and consumer, investor and speculator meet in legit- 
imate trade; for the pretended buying of millions of 
bushels of grain in bucketshops will not add a fraction of 
a cent to the price of the product of the farm, nor will the 
pretended selling of as much increase the supplies of the 
consumer or lessen the cost of his loaf a farthing. Nor 
should they be confounded with the offices of legitimate 
brokers, which they endeavor to imitate in appearance. 

The term '' bucketshop," as now applied in the United 
States, was first used in the late '70s, but it is very evident 
that it was coined in London as many as fifty years ago, 
when it had absolutely no reference to any species of specu- 
lation or gambling. It appears that beer swillers from the 
East Side (London) w^ent from street to street with a 
bucket, draining every keg they came across and picking 
up cast-ofif cigar butts. Arriving at a den, they gathered 
for social amusement around a table and passed the bucket 
as a loving cup, each taking a " pull " as it came his way. 
In the interval there were smoking and rough jokes. The 
den soon came to be called a bucketshop. Later on the 
term w^as applied, both in England and the United States, 
as a by-word of reproach, to small places where grain and 
stock deals were counterfeited. 

Bucketshops have been condemned by statute as crim- 
inal and pernicious in many States in the Union, but the 
anti-bucketshop laws are rarely enforced by those public 
servants whose duty it is to enforce them. The prosecu- 
tions thus far, except in Illinois, have been left to private 



40 GOLD BRICKS OF SPECULATION 

citizens or associations for the suppression of gambling. 
In Chicago, however, we have been blessed for six or seven 
years past with an able, honest and fearless administration 
of the State's Attorney's office, by Mr. Charles S. Deneen, 
and the result has been gratifying. Prior to Mr. Deneen's 
election to the office of State's Attorney in 1896, no prog- 
ress had been made in enforcing the Bucketshop Statute 
adopted in 1887; but since 1897 numerous prosecutions 
ably conducted In' Mr. Albert C. Barnes, first assistant to 
Mr. Deneen, have resulted in many convictions and have 
proved exceedingly discouraging to this class of criminals. 

Those engaged in the efforts to suppress bucketshops 
are met at many points with apparent corruption in high 
places, and have it forcibly impressed upon them that the 
profitableness of the " game " measures the political influ- 
ence of the bucketshop. 

Bills to suppress bucketshops w^ere introduced in the 
legislatures of half a dozen States during the early months 
of 1903. Five of the bills w^ere " killed." The one that 
escaped death by a narrow margin was passed by the Wis- 
consin Legislature and became a law when approved l)y 
the Governor — on May 21, 1903. As this law contains a 
carefully drawn legal definition of a bucketshop, and as it 
is the latest one passed, I deem it advisable to include it in 
this article for the information of lawyers and students: 

AN ACT To Prohibit Bucketshops and Biicketshopping Within the 
State of Wisconsin, and Concerning Board of Trade Trans- 
actions. 
The People of the State of Wisconsin^ Represented in Senate and 
Assembly, Do Enact as Folloivs: 

Section i. — A bucketshop, within the meaning of this act, is 
defined to be an office, store or other place wherein the proprietor 
or keeper thereof, either in his or its own behalf, or as the agent or 
correspondent of any other person, corporation, association or co- 



BUCKETSHOPS 41 

partnership within or without the state, conducts the business of 
making or offering to make contracts, agreements, trades or transac- 
tions respecting the purchase or sale, or purchase and sale of any 
stock, grains, provisions or other commodity, or personal property, 
wherein both parties thereto, or said proprietor or keeper, contem- 
plate or intend that such contracts, agreements, trades or transac- 
tions, shall be, or may be closed, adjusted or settled according to, or 
upon the basis of, the public market quotations of prices made on 
any Board of Trade or Exchange, upon which the commodities or 
securities referred to in such contracts, agreements, trades or trans- 
actions are dealt in, and without a bona fide transaction on such 
Board of Trade or Exchange ; or wherein both parties or such 
keeper or proprietor shall contemplate or intend that such contracts, 
agreements, trades or transactions shall be, or may be, deemed closed 
or terminated when the public market quotations of prices made on 
such Board of Trade or Exchange, for the articles or securities 
named in such contracts, agreements, trades or transactions shall 
reach a certain figure ; and also any office, store, or other place 
where the keeper or proprietor thereof, either in his, or its own 
behalf, or as agent aforesaid, therein makes or offers to make, with 
others, contracts, trades or transactions for the purchase or sale of 
any such commodity wherein the parties do not contemplate the 
actual or bona fide receipt or delivery of such property, but do con- 
template a settlement thereof based upon differences in the prices at 
which said property is, or is claimed to be, bought and sold. The 
said crime shall be complete against any proprietor or keeper thus 
offering to make any such contracts, trades or transactions, whether 
such offer is accepted or not. It is the intention of this act to pre- 
vent, punish and prohibit, within this state, the business now en- 
gaged in and conducted in places commonly known and designated 
as *' bucketshops," and also to include the practice now commonly 
known as '' bucketshopping," by persons, corporations, associations 
or co-partnerships, who or which ostensibly carry on the business 
or occupation of commission merchants or brokers in grain, pro- 
visions, petroleum, stocks and bonds. 

Sec, 2. — It shall be unlawful for any corporation, association, 
co-partnership or person to keep, or cause to be kept, within this 
state any bucketshop ; and any corporation or person, whether 
acting individually or as a member or as an officer, agent, or em- 
ploye of any corporation, association, or co-partnership, who shall 
keep or assist in the keeping of any bucketshop within this state, 
shall upon conviction thereof, be fined in the sum of not less than 



42 GOLD BRICKS OP SPECULATION 

twenty-five dollars and not more than one hundred dollars, and be 
imprisoned in the county jail until such fine is paid, not exceeding 
six months; and any person or persons, who shall be judicially 
determined guilty of a second offence under this statute, in addition 
to the penalty above prescribed, shall, upon conviction, be imprisoned 
in the county jail for a period of not less than ten days, and not 
more than sixty days, and if a corporation, shall be liable to for- 
feiture of its charter ; and the continuance of such establishment, 
after the first conviction, shall be deemed a second offense. 

Sec. 3. — Any corporation, association, co-partnership or person 
who shall communicate, receive, exhibit or display in any manner, 
any statement of c|uotations of the prices of any property mentioned 
in Section i hereof, with a view to any transaction in this act pro- 
hibited, shall be deemed an accessory, and upon conviction thereof, 
shall be fined and jnmished the same as the principal, and as pro- 
vided in Section 2 of this act. 

Sec. 4. — It shall be the duty of every commission merchant, co- 
partnership, association, corporation or broker doing business as 
such, to furnish upon demand, to any customer or principal for 
whom such commission merchant, broker, co-partnership, corpora- 
tion or association has executed any order for the actual purchase 
or sale of any of the commodities hereinbefore mentioned, either 
for immediate or future delivery, a written statement containing the 
names of the parties from whom such propert}^ was bought, or to 
whom it shall have l^een sold, as the case may be, the time when, 
the place where and the price at which the same was either bought 
or sold ; and in case such commission merchant, broker, co-partner- 
ship, corporation or association, shall refuse to promptly furnish 
such statement upon reasonable demand, the fact of such refusal 
shall be prima facie evidence that such property was not sold or 
bought in a legitimate manner. Every purchase or sale, or pur- 
chase and sale, and all other transactions by and between members 
of any lawfully constituted chamber of commerce or board of trade, 
organized under or by virtue of the laws of this state, and in accord- 
ance with the charter of such corporation and the rules, by-laws, and 
regulations adopted thereunder, shall be prima facie valid. 

Sec. 5. — This act shall take effect and be in force from and 
after its passage and publication. 

(Approved May 21, 1903.) 

It is time that something was done to check the grow- 
ing evil of gambhng on produce, cotton and stock exchange 



BUCKETSHOPS 43 

quotations. A l^eginning has been made, but the move- 
ment has not gone far enough. These excrescences have 
muhiphed rapidly, and so dangerousl}' near do they come 
to being broadly popular that the mercantile community 
owes it to itself to apply the knife at once. 

Moreover there is no form of gaml)ling more disastrous 
to the player than bucketshop gam1)ling.- Its cloak of semi- 
respectability and its likeness in many of its outward fea- 
tures to regular and reputable commission houses, makes it 
the most insidious of temptations to the young speculator 
and aspirer after wealth. But it is the open door to ruin. 

Men do not blush at being seen in a bucketshop as they 
would if caught in a faro bank or poker room, though 
they are drawn thither by the same passion for gambling 
that takes them to the regular gambling den. And not 
only is this true, but the bucketshops notoriously carry on 
a worse swindling game than the " blacklegs." The great 
wealth the chief bucketshop men of the country have 
acquired proves this. Alen can be pointed out in Chicago, 
New York and other cities of the country who have 
amassed fortunes at the business, while their thousands 
of victims are impoverished and ruined. 

Most of the bucketshops occasionally allow a customer, 
who is known to have money, to make something, in order 
to encourage him to '' blow it in " more freely. But a 
bucketshop which was overhauled in New York appeared 
to have varied a little from the ordinary methods of the 
" business." This concern, according to the sworn testi- 
mony of one of the partners, who turned State's evidence, 
simply took in all the money it could get and boldly divided 
it among the members of the firm and its agents. The fol- 
lowing is a part of the testimony of the partner, Troy, of 
Tobin, Troy & Co. : 



44 GOLD BRICKS OF SPECULATION 

" The arrangement between us was that Davis (the agent) was 
to have half of all the money he brought into the office, and that 
Tobin, Troy & Co. were to have the other half." 

''You mean half of the profits, don't you?" asked Magistrate 
Crane. 

'* No, sir ; I mean half of the money," replied Troy. 

'' Do you mean to say that if Davis brought a customer to you 
who had $10,000, he would get $5,000 and that you and Tobin 
would get the other $5,000?" asked the Magistrate, incredulously. 

" That's exactly what I mean," said Troy, '' and what is more, 
that is exactly what was done." 

'' I should have thought," said the magistrate, " that the victims 
would have discovered your game." 

'' We simply gave them the toss," said Troy. " They had no 
way of detecting us. We never made a stock transaction in such a 
case as Mrs. Wheaton's. We would wait until after 3 o'clock, when 
the exchanges were closed, and then make out duplicate slips, both 
buying and selling, and then the following day chose the one that 
would cause our customer to lose and destroy the other one. In 
this way it did not take long to wipe out any amount of margins." 

''How was Mrs. Wheaton's money ($2,000) divided?" 

"I got $600; Davis took $700; Tobin got $300, and we spent 
$400 on the office," was the answer. 

In this way the customer's money disappeared a little 
quicker than under the ordinary operations of bucketshop 
gambling, — that ^vas all. The goose is always plucked, 
and the lamb shorn before the swindlers are through with 
their work. 

There exists no substantial reason why the extirpation 
of these bucketshops should not be completed. They are 
nothing more than places where wagers are made on 
fluctuations in prices, and where there is not the slightest 
intention at any time either to deliver or to receive the 
goods specified. For this reason they cannot be dis- 
tinguished from the ordinary gambling hells. They are 
not pursuing a legitimate business of any kind ; they have 
no responsibilities such as attach to members of regular 



BUCKlirSIIGPS 45 

trade organizations which are watchful of the conduct of 
their meml^ers and insistent upon certain standards of 
business integrity. Jf they were totally suppressed, the 
channels of trade would not be disturbed in the least, while 
the public morals would benefit as they do by the suppres- 
sion of faro banks and other similar institutions. Their 
only function is to take money from customers who are 
moved to gamble. Their relation to the business world is 
similar to that of the pool-room. 

The shop and its habitues are entitled to no more con- 
sideration than would be claimed for a faro "joint" and 
its attendant loafers and gamblers. The police know well 
enough that there is one certain, simple manner of closing 
'' faro " joints, and that is by raiding them, smashing the 
furniture and dragging the inmates to the lockup. The 
same simple and efficacious method will close the bucket- 
shop. 

A decision of the Massachusetts Supreme Court in a 
bucketshop case practically classified bucketshops with 
common gambling houses. A verdict which was given for 
a plaintifif who had lost his money in a bucketshop deal w^as 
sustained, and the Court said: 

'' The transaction testified to is plainly a device to make a wager 
under the guise of a contract for the purchase and sale of shares of 
stock. The language of both witnesses throughout is the language 
of a wager and not of a real transaction." 

Even when markets go favorably for the players, the 
bucketshops get the better of them, for they then con- 
veniently " fail, " and the fortunate " winner " has no 
chance to get back even his original deposit. 

During the great boom in stocks and wheat in 1901, 
every bucketshop in Chicago, save one or tw^o, failed and 



46 GOLD BRICKS OF SPECULATJOX 

suspended payment. Those that stood the pressure cheated 
their customers in some other way. 

A good story has been told about Boswell's experience 
with a bucketshop, which T quote l)ecause it is typical. The 
great writer confided to Doctor Jonson that he thought 
he had a plan for beating the bucketshoj). Jonson tried 
to dissuade him, but Boswell went boldly forth. He met 
one who had had experience, and said : 

" I understand, sir, that you once made a laro^e sum of money in 
a bucketshop? " 

" I did," said the man. " 1 ran a shoestring up to $1,500." 

" I don't quite catch your meaninsi: — the shoestring part ? " said 
Boswell. 

" I mean," said the man, " that 1 ran $10 to $1,500." 

" You are just the man I have l:)een looking for," said Boswell ; 
" tell me how you did it." 

" It's not a long story," said the man. " At that time I was new 
in the business. I (hdn't know a thing about speculation. I went 
into a bucketshop one day and decided to buy some wheat. It was 
July wheat. You know those sHps of paper, one for buying and 
one for selling, on which you jot down your ])lay? Well, I took 
what I thought was the buying slip and gave the shark at the 
window my $10. The market hroke three points in an hour, and 
I was about to tear up that alleged contract when I read it over 
and found I had sold the wheat. I closed it and sold some more, 
and made money. They told me it would make things handier for 
the bookkeeper to leave my profits with them. I sold and bought, 
making many mistakes, but somehow winning. I remember the 
last deal. I went up to buy. The shark said gruffly, * Did you say 
buy?' I thought it hurt his feelings and I said ' Xo, sell.' Well, 
that market instantly fell like a good man from grace and T cleared 
up $1,500. I came down the next day to get it but the bucketshop 
man and the shark had closed up and skipped." 

" Didn't you get anything? " 

" No, nobody got a thing. I lost the $10 I began with. I went 
to see a lawyer and he said I couldn't do anything, as I freely gave 
the shark my money to handle." Then the man fastened his eyes 
on the blackboard and Boswell retired disappointed. 



BUCKETSHOPS 47 

As a matter of fact, all other forms of gambling or 
swindling are commonplace and comparatively innocent 
when compared to the satanic bucketshop, which has caused 
more moral wrecks, more dismantled fortunes and made 
more of the innocent suffer than any other. Just why so 
brazen an iniquity in the guise of speculation should be 
allowed to exist it is difficult to explain. Open gambling 
has been placed under the ban of civic reform; the policy 
shop, the lottery and other less dangerous methods of 
swindling have been effectively stamped out of most cities ; 
yet the old bucketshop tiger continues to sink its teeth into 
the ambitions of young and old, dragging them down to 
forgery, embezzlement, suicide, or, that which is quite as 
bad, broken spirit for legitimate endeavor. 

Under the circumstances, the sympathy of the public 
should be with the movement to drive bucketshops out of 
business, to close them along with all other gambling insti- 
tutions. 

For the purpose of giving those of my readers who 
desire to make a full investigation of the evils of bucket- 
shops an opportunity to study the character of the keepers, 
the operations of a 1)ucketshop, the position they occupy 
in relation to the law, the bold and unscrupulous methods 
adopted by them and the disguises they assume, I have 
prepared two articles which uncover many of the tricks 
and villainies of the game. Both articles relate more or 
less of my personal experiences with two notorious bucket- 
shop-keepers. The stories might well be headed '' Bucket- 
shoppers Whom I Have Met." 



48 GOLD BRICKS OF SPECULATION 



CHAPTER II. 

BUCKETSHOP METHODS. 

Bncketshop methods, as explained by evidence and decisions in 
case of Board of Trade of City of Chicago z's. The Christie- 
Street Commission Co. (a bncketshop) : In- C. C Christie, "king 
of the bncketshop-keepers in the West " ; and by correspondence 
showing how the ''sucker" is induced to send his money to the 
bncketshop. 

In the early part of 1900 the Christie- Street Commis- 
sion Co., a bucketshop of Kansas City, Mo., applied to the 
Circuit Court of Cook County, Illinois, for a temporary 
injunction restraining the Board of Trade of Chicago and 
the Western Union Telegraph Co. from cutting off the 
Chicago Board of Trade grain quotations from the bucket- 
shop. The injunction was issued. Upon motion to dis- 
solve the injunction, Judge Tuley directed the parties to 
take evidence at Kansas City before a master-in-chancery, 
upon the issue whether or not the Christie-Street house 
was a bucketshop. After the return of the evidence to the 
court and arguments by counsel consuming more than a 
week, the judge decided in an elaborate and able opinion 
that the Christie-Street Commission Co. was a ])Ucketshop 
and dissolved the injunction. The bucketshop appealed 
to the Appellate Court of Illinois, where the opinion of 
Judge Tuley was affirmed. 

In order to demonstrate to the reader in as simple 
language as possible what a bucketshop is, how it operates 
and what the courts have decided with reference to bucket- 
shop methods, I have taken such parts of the evidence and 
the opinion of the court as bear directly on the bucketshop 



BUCKETSHOP METHODS 49 

question. Thus 1 give you, from the hps of the employes 
and customers of the bucketshop, the exact method of its 
so-called trading, and from the learned judge's opinion, 
his conclusions as drawn from the evidence of the em- 
ployes and customers. The evidence was all taken under 
oath and the judge's opinion stands as the law. A state- 
ment of the case follows : ^ 

STATEMENT. 

In its bill the Christie-Street Commission Co. averred 
that its business " is and always has been a legitimate busi- 
ness." 

The answer of the Board of Trade denied this and 
alleged the Christie-Street Commission Co. was conduct- 
ing at Kansas City a so-called " bucket-shop," wherein the 
transactions between it and its customers consisted in cer- 
tain pretended contracts respecting the purchase and sale 
for future delivery of grain and provisions, wherein the 
parties only contemplate the adjustment and settlement 
thereof according to the public market quotations of the 
Chicago Board of Trade, and that in all said transactions 
no bona fide transaction or contract for actual delivery is 
made or intended, but only that such transactions or trades 
should be deemed terminated and closed when the market 
quotations on the Chicago Board of Trade for the articles 
mentioned in the contract reached a certain figure. In 
other words, such transactions were in reality, but bets on 
the market prices as determined by such quotations, and 
that such quotations w^ere furnished to Christie by the 
Western Union Telegraph Company, and were being used 
solely for the purpose of determining said bets or gambling 
transactions, and were essential to the making of the same. 

The Christie-Street Commission Co. had an office in the 



50 GOLD BRICKS Of SPECULATION 

business portion of Kansas City, Missouri; from this office 
ran four private wires, reaching as far west as Denver, 
and as far south as Dallas and Fort Worth, Texas, and 
connecting with like offices in fifteen different cities and 
towns. In this office there was a telegraph operator em- 
ployed to look after each of these private wires. It also 
appeared in evidence that the Western Univon Telegraph 
Company had a wire running from the wheat pit of the 
Chicago Board of Trade to its office in Kansas City, over 
which, between the hours of 9:30 A. M. and 1:15 P. M. 
(the market hours of the Chicago Board of Trade), the 
quotations of prices on the Board of Trade were con- 
tinuously sent from the floor of its Exchange. In Kansas 
City there ran from the general market wire a '' loop " wire 
to the office of Christie, at the end of which Christie had 
a telegraph operator, who received the quotations as they 
came, and called them oft'. 

In the Christie office was also a large blackboard, in 
front of which stood an employe, who, as the Chicago quo- 
tations were called oft" by the telegraph o])erator, wrote 
them upon the blackboard. In front of this blackboard 
were arranged twenty or thirty chairs, where the local 
customers of Christie sat and watched the fluctuations of 
the quotations on the blackboard. 

The operators of the private wires above referred to, 
when not receiving orders for trades from the corres])ond- 
ents or branch oftices, were re-transmitting over the i)ri- 
vate wires, these Chicago (juotations as they were posted on 
the blackboard, to the dift'erent offices where were similar 
blackboards, upon which were likewise posted these market 
quotations. The orders, however, coming from these 
offices to Christie's office had the right-of-way upon these 
private wires. 



BUCKETSHOP METHODS 51 

The profits of the business were divided between these 
correspondents and Christie on an agreed, and sometimes 
varying, percentage. The expenses of the private wires 
were divided between these correspondents and Christie 
in an agreed proportion. Each of these branch offices had 
its own set of local customers, and wdien one of these 
desired to make a trade, his order was sent by the cor- 
respondent over the wire to Christie in Kansas City, and 
there executed in the manner hereinafter stated. Thus 
each customer in each of these branch offices was brought 
in direct relation with Christie's office in Kansas City as 
fully, for all practical purposes, as if he had sat in one of 
the chairs in front of the blackboard in Christie's office. 

Christie's advertisements in three Kansas City papers 
contained the following statement : " We buy or sell for 
immediate or future delivery, grain and provisions for 
delivery on the Board of Trade in Chicago." 

It will be seen later how Christie also sought to connect 
himself with the Board of Trade by the form of contract 
which he used. He also sent out at the end of each day to 
every customer trading that day an account of purchase 
and 5ale upon which were printed the following words: 
'' Private wires to Chicago and New^ York." The evi- 
dence showed that Christie had no private wires to either 
Chicago or New York, and the only purpose of this mis- 
statement was, of course, to mislead his customers into the 
belief that their trades were in fact executed upon the Chi- 
cago Board of Trade and the New York Stock Exchange. 

I now call atte-ntion to the evidence as to how trades 
w^ere made, that -is, how they were opened and closed in 
Christie's office. 



62 GOLD BRICKS OF SPECULATION 

How Trades Are OrEXED. 

First, as to Christie's local customers in Kansas City — those per- 
sonally in his office there — R. J. ]\Iason, order clerk for two years 
for local customers, testified : 

*' In a majority of the cases when a customer desires to make a 
sale or purchase of products dealt in on the Chicago Board of 
Trade, he will step up to the counter where I am. 1 stand facing 
the blackboard, and on the l)lackboard is reported all the quotations 
that come in over the two quotation wires, and when the customer 
says he wants to buy, say i,ooo bushels of ^lay corn, I look at "the 
blackboard to see the latest quotation, and when I find it, I take that 
merely as a basis to fix the price at which T would make the trade. 
* ''' * I use the quotations as the basis on which 1 would trade, 
for my own price. I may or may not take it. as T see fit. I use 
my own discretion in making these trades. I am not obliged to 
make these trades. * '■' '■' In taking orders from customers and 
making memoranda such as these, ordinarily I write in the memo- 
randum the latest quotation on the blackboard for the article to 
which the contract or memorandum refers. If the customer agrees 
the trade is made. Then I fill out the memorandum, as follows : 

Notice.— This Contract is Transfer.xble. Take care of it: any money 
due on it we will pay to the party presenting it. 

CHRISTIE-STREET COMMISSION COMPANY. 
Capital $50,000, fully paid. 
4987 GRAIN, PROVISIONS AND STOCKS. 

exchange building. 

Kansas City, Mo., 4-25. . . . 1899. 

M Castle 

You have this day SOLD to us at one-eighth less than the prices named 

in this memo i May C. [corn] @ 39^8. ... for delivery in Cgo. [Chicago.] 

^Margins deposited with us $10. 

Notice. — All contracts made with us for the purchase or sale of Grains, 
Provisions or Stocks, made with us or through us are subject to the rules 
and regulatons of the Board of Trade or Stock Exchange in the city where 
delivery is to be made, and we hereby agree to receive all property sold to us 
or through us, and to deliver all property bought from us or through us at 
maturity of contract, and we will not accept business under any other con- 
ditions, and the trades above recorded are made with this understanding. 
We also reserve the right to close any trade made with us or through us 
without notice, if the money in our hands is, in our judgment, insufficient 
to protect the trade. 

Christie-Street Commission Co. 
Per . . . .M 1230. . . . 

[What was filled in by witness was the date, " i May C, 39 — 
1/8," " Cgo." and "$10.00 " ; the rest was printed.] 
The witness continued : 



BUCKETSHOP METHODS 53 

'* At the time that transaction (represented by the above memo- 
randum) was made, I looked at the blackboard and found the latest 
quotation for May corn was 39>^, and thereupon wrote in this mem- 
orandum the figures 39>^. The words ' Cgo ' in this memorandum 
is an abbreviation for Chicago, and means that deliver}' was to be 
made in Chicago. The words ' i May C ' mean i,ooo bushels May 
corn. The words in memorandum ' Subject to the rules and regu- 
lations of the Board of Trade or Stock Exchange of the city where 
the operations are to be made refers in this transaction to the 
Chicago Board of Trade. '^ * ''' When these trades were made 
by Mr. Castle I received $10 on each transaction as margin; $10 
is the smallest margin I take on transactions of this character. 
=sc it J), ^g ^ j.^^|g J l-^l^g ^l^g price from the blackboard and write 
it in the memorandum, and say nothing more about it. ''' ''' * 
The Chicago Board of Trade has nothing to do with transactions 
such as i\Ir. Castle's, except as a basis on which to do business. It 
is the market that furnishes the prices of commodities in which we 
deal, and has nothing further to do v/ith our business. The quota- 
tions are sent to us, we transcribe them on the blackboard, and 
when a deal is proposed, take the last quotation price and write in 
this contract, and in every case of each individual the contract 
stands by itself. '•' '•' "^ Ordinarily, if a man steps up to the 
counter, the trade is made either on the latest quotation on the board, 
or, if it is not a fresh one, I will wait until one comes in, and make 
it on that. The customer asks if I will make a trade on a certain 
price, and it does not pay to take half an hour to make that trans- 
action, and I say yes or no. Sometimes I look at the blackboard and 
make a price. It is true that I make a price from the latest quota- 
tions on the blackboard or I wait for a fresh one. "^ "^ ^ " 

William Coyle testified : 

" Have had transactions with the Christie Company. First, I 
went to the man at the counter, named Mason, and said I would buy 
a thousand July corn. Mason said, 'All right.' He took the price 
of¥ the board — the latest quotation that came in. I asked him what 
commission he charged, and he said one-eighth. Then Mr. Miller, 
who also worked there, came up and explained it ; he said one-eighth 
on corn and one-fourth on stock. There was nothing said about 
agreeing on a price, except that he took- the price off the board, 
and I paid him $10, that was the understood price — i cent margin. 
Miller made out a trading card. After I got it I told Mason I 
wished he would mark the exhaust, so that I would know when my 
money would run out, so I would not forget — ^^and I laid the card 



54 GOLD BRICKS OF SPECULATION 

down and jMiller took it and marked the second line where it says 
— exhaust, etc." 

R. M. Harper testified : 

'' I went to the office of the Christie Company on the morning of 
the 25th. 1 made two trades, one in May corn and one in July oats. 
I stepped up to the counter to a man whom I since know was Mason, 
and told him I wanted to buy a thousand bushels of corn at 39}^ 
and a thousand July oats at 23 ;>^. Mason glanced up at the board 
and made out a ticket, one for May corn and one for July oats ; 
there was nothing else said at the time the trade was opened. 
Mason immediately filled out these tickets, and one similar thereto. 
He did not say anything ■■' " '•' There was nothing said at the 
time these trades were opened with Mason as to the price they 
would be opened except what has been said." 

As to the method of filling orders that come from the corre- 
spondents over the private wires, Gideon Huscher testified : 

" I am order clerk for wires with the Christie-Street Company, 
for orders that came over them. The operators of the private wires 
receive these telegrams and write them on slips of paper and hang 
them on a hook. I stand behind them. Mi of this ticket means a 
margin of $10.00, or ic on a thousand. A ring around the 83/2 
means it had been executed. This is an actual transaction of the 
30th of April and this was received b}- the operator, who hung it 
on the hook in front of me, and I took it off, and at the time it was 
received marked it and put a ring around the price and reported it 
to the originating office. I waited until the quotations reached that 
point and then put a ring around it to indicate that the trade was 
made. After T had filled the order and the operator reported it, it 
would go to the bookkeeper. The originating office gives the trade 
a number. '^ " * All the telegrams over the private wires go 
through my hands. These are all of the one day ; there are 323 
(referring to the telegrams at hand). They represent either the 
starting or closing trades on April 30th. ■•' " ■■' 

How THE Bkt Is Detp:rminl:i). 
First. Upon the order of the customer. 
As to the local trade Mason testified as follows : 
'' I have to do with the closing of trades of the character repre- 
sented by this memorandum. If a person wants to close a trade we 
agree on some price to cancel it. I am the one that does that. If 
a customer wants to close a purchase, he would step up to me at 
the counter and signify his desire. I would look at the last quota- 



• BUCKETSHOP METHODS 55 

tion on the blackboard for the article, and from that derive a closing 
price. It requires the agreement of myself and the customer to 
close a trade at that price. 1 do not know of any transactions where 
I closed at any different price than the last quotation on the black- 
board. - A transaction is closed when the party desires to close out 
by the last quotation on the blackboard, if I am satisfied to make a 
trade at that price. It is optional with me whether I will close the 
trade or not. There is nothing obligatory on us to take a trade off 
his hands. Strictly speaking, when a man gets in on a deal, he 
cannot get out without our consent. I never exercised the right to 
refuse to close a trade at the price of the last quotation on the black- 
board when I thought it was a fair proposition, but frec[uently do 
where I think it is not. * '•' '•' 

" We do not always close a trade or make it if our customers 
want to. Many times I would not let them out because it might 
be when we would not want to make a trade. The Christie Com- 
pany reserves the right to keep a man in until it wants to let 
him out." 

Coyle testified as to the closing of his trades as follows : 

" The market went up and I closed the trade. When it reached 
6y}i I stepped up to Mason and said I would close the deal. I 
took the figures after the word ' closed ' off the board and he looked 
to see if I had the right quotation. There was no talk of agreeing 
on a price between us at which to close or open." '■' '•' * 

In speaking of another trade he said : 

" T stepped up to Mason when the last quotation was at that 
figure and said, ' Close my July at 67 >^.' I handed him the card 
and he looked at the blackboard and saw I w^as right and made out 
one of those white slips for the cashier. He filled it out with the 
number of the trade and the price it was closed at, Gy^. That was 
the last quotation on the July wheat." 

And again of another transaction : 

" When it reached Gy^s, I closed it at that price. I told Mason 
to close it at the last quotation on the board and he looked to see 
if I was right, and then made out one of those tickets for the cashier. 
He inserted 67^^ with the number of the deal. That was the last 
quotation on the board for July wheat. '^ "^ '^ I got my money 
in the same way." 

As to the closing up of orders received from customers at the 
branch offices, Huscher, order clerk, testified : 

''The form of telegram that I would receive to close a trade 
would be ' Sell 2 ck. 40 close 100-95.' ^^ means to close No. 100 



5G GOLD BRICKS OF SPECULATION 

and No. 95. In that telegram ' c' would mean corn and ' k ' would 
mean May. 40 would be the price and the number w ould be in the 
prior trades. That telegram would be hung up to me. '■' * * 
If the market would permit it, I would execute it. I would take 
the quotations from the operator's call, but I look at the blackboard 
to reassure myself. If the market would permit it, I would put a 
ring around the price, which would indicate to the operator that it 
was executed, and hand it back to the operator for him to report to 
the originating office. After I passed the transaction around to the 
bookkeepers' department I would have nothing more to do with it. 
That represented in one transaction the part I perform. ''■'- '■' ''' 
The closing telegrams with a ring around the price are put in the 
basket the same as others and the bookkeeper gets them." ''' ''' '•' 

As to trades closed without orders from customers or for want 
of margins, Richardson testified as follows : 

** I am margin clerk of the Christie-Street Commission Com- 
pany ever since their organization about three years ago. I keep 
the margin sheets. After a memorandum is made out for the sale 
or purchase of a commodity it reaches me in a minute or two ; that 
is, immediately. I hang it up on the hook during the day and 
enter it up as an open trade on the slips. * '•' " This is a sale 
of a 1,000 bushels of Alay corn at 39]/^. [Exhibit " A " shows a 
ic. margin.] If ^lay corn during that day sold as high as 40^ I 
would enter it up the moment it touched 40, and would take it off 
the hook and enter it in the book kept for that purpose. It would 
be entered as sold at 39^8 and exhausted at 40. " ''' '■' All 
transient trades are entered in that way ; that ends the transaction ; 
constitutes the whole of it. 

" If on that day or the next day, or any succeeding day, the 
price of May corn reached z]© or over, I would enter it right up as 
an exhaust. It would exceed the margin and the trade is through 
then and closed ; that is all there is to the clositig. " ''' ■'■' The 
balance of the transactions where the margin is exhausted is the 
same.'' 

The same witness in speaking of trades made by telegram over 
private wires, said : 

" That transaction would reach me in a minute or two at the 
outside, and I would enter it on the sheet. This comes from one of 
the branch offices. When I entered that memorandum I would 
make a memorandum called a ' stop order,' indicating when the 
margin mentioned in the telegram was reached. On that trade it 
reads : ' Stop Older No. 389. If market advances to 68% — y2,huy 



BUCKETS/IOP MlirilODS 57 

1 September wheat.' J would lile the stop order away until the 
transaction was closed or exhausted. If during the day September 
wheat on the blackboard advanced to GSy^-lA it would be rung 
up and entered against that and the trade would be closed and the 
I cent margin exhausted. ■■' " -^ We put a stop order in each 
trade. The stop order comes from the customer who puts the 
trade in and we simply make a record of it. When I got Exhibit 
' K ' [telegram] I took a memorandum of where it exhausted on 
the memorandum blank. " " " The customer placed the mar- 
gin on that trade; that is, a i-cent margin. The margin ex- 
hausted at Vs cent because the ]/% remaining is the profit for doing 
business. "^^ -^ '^ When the market reached 68^- 1^, I would 
close the trade by entering the price against it and notifying the 
customer. I practically closed the trade. VVc keep the trades listed 
all the time, and after the margin is exhausted we do not carry 
them any longer. I enter upon these sheets all trades in which the 
market has gone beyond the margin during the day. Speaking gen- 
erally, it is my duty to keep my eyes open all the time on the black- 
board and close the trades when the margin is exhausted. That is 
done during the day as the quotations come in. Sometimes I go 
over, at the end of the day, the transactions and discover any that 
have escaped. Another clerk, named Tice, and I have the closing 
of all trades that exhaust their margin. That is all I do and all 
he does. He takes one line of customers and I take another. We 
simply keep a memorandum of the transactions when the margin 
is exhausted. The sale would be ofifset against the purchase or the 
purchase against the sale as either was the opening trade. No 
actual property passes when the transactions are closed by exhaust 
or order. 

'' These tw'o papers are specimens of what I call stop orders in 
case of job lot accounts. I have no different form from these. 
That is the form of regular stop orders. One of these is as follows : 
ii6K ' Stop Order. 

40 
Account Armstrong Ticket No. 4944. 

If market declines to ii^Vi. pell. 
20 Sug. 4/30. 

*' In the transaction shown in Exhibit ' A ', a stop order was 
made out immediately after the contract. The price mentioned in 
the stop order would be 40 cents, seven-eighths above the price 
written in the contract. Sometimes the man that stands beside me 
attends to the exhausts, although all are filled by dififerent clerks. 



58 GOLD BRICKS. OF SPECULATION 

The man who stands with a lot of stop orders in front of me is to 
watch the market and when stop orders are reached, execute them 
or give them to a clerk who will do so. 

" When 40 was reached, the man I speak of drew a ring around 
the order and that was the execution. That is all there is to do with 
that exhibit. /// all cases where there is a specific ///arq//; f// the 
transaction, a stop order is made out at once in the form I Jia-T'C 
here. The stop orders are kept by tJie stop order clerk. He stands 
in front of the blackboard. There is a lari^e number of stop orders 
on the table arranged in piles, zvhich indicate the diifcrent com- 
modities, and it is his duty to watch the quotations as they vary on 
the blackboard, watching the different stop orders, and when the 
market price of a commodity on the blackboard reaches a certain 
price, it is the duty of the clerk to look over all piles of stop orders 
and if the price mentioned in any of them is passed or reached, he 
writes or marks the price on the stop order and puts a circle arouiid 
it, which indicates that he has closed the transaction, and there is 
nothing else involved except to put the transaction in the job lot 
books." 

Tice testified as follows : 

" I am connected with the Christie Company as margin clerk 
with Wv. Richardson. \\'c keep all the margin sheets. When a 
trade is opened with the Christie Company, the trade is entered 
either on my or Richardson's sheets, whether purchase or sale. If 
a purchase or sale is closed for want of margin, the corresponding- 
counter trade is entered opposite on the same line of the sheet, at 
the price at which it was closed. Tlicre would have to be a sale in 
order to close it up. For every entry on one side of these margin 
sheets, I would have to have the same amount at the closing out. 
I keep a trade until I get something to close it out ; that is, another 
trade. It requires another trade to close it. ■■' ■■" ''•' When I 
get through with a trade I draw a line through both and keep the 
transaction open until each trade has a corresponding counter 
trade. " " " 

" I have been in the employ of the Christie Company for several 
years and do not recall a single instance when the second entry was 
not made in one of two of these ways — either by stop order or a 
telegram — and during all that time I keep the trade that has a 
number on my sheet and carry it forward until I get a counter 
trade. During the time I have been employed with the Christie 
Company, / could not say that there has been any actual delivery of 



BUCKETSHOP METHODS 59 

property upon the trades entered upon the margin sheets. I know 
of none. I cannot recall that there has been one.'' 

The other margin clerk (Richardson) testified: 

" No actual property passes where the transactions are closed 
by exhaust or order. I never knew of any property actually passing 
when a trade was closed with a stop order or closing order. All 
transactions are closed in one of the two ways, or delivery when the 
delivery time comes. The bulk of the trade is closed by exhaust of 
the margin or by closing order. / do not knozv of any order to buy 
or order to sell during the last six months that has not been closed 
out in either of these two zvays. I would know of it if it had been. 
Either Tice or I would have known of it. / cannot remember a 
transaction that was closed except in those two ways, and I don't 
recall one this year. I guess most of the transactions under my 
jurisdiction have been closed either by order or exhaust. I cannot 
say whether all of them have. It might be, but I would not be posi- 
tive. / do not recall a)iy trades that were actually delivered.^' 

Tinker, appellant's bookkeeper for three or four years, testified 
as follows : 

"/ don't know of any entry of any delivery of grain or pro- 
ZHsions in their books. I mean by that, delivery to the Christie 
Company or deliver)- by them of any grain or commodity dealt in 
on the Board of Trade. // any delivery had been made, I woidd 
knozv of it. It zvould necessarily appear in some zvay in the books. 

Of these transactions, Mason testified : 

''In these transactions, we don't claim that any of them are 
actually made or filled on the Board of Trade ; we are the princi- 
pals ourselves. '•' '•' * As a rule, all these transactions concern- 
ing grain and provisions that we make, have reference to the Board 
of Trade of the City of Chicago. " '•' * In this class of trans- 
actions, there is not any making of a trade on any Board of Trade." 

It will be noted that the contracts read " one-eighth 
less " than the blackboard price in case of sale and " one- 
eighth more " than the blackboard price in case of a pur- 
chase of Board of Trade commodities, and in case of stocks 
the fraction is one-fourth instead of one-eighth. 

These fractions correspond to the rates of commission 
on the two exchanges, and, while called " advantage in 
price," they w^ere in reality but a commission under another 



60 GOLD BRICKS OF SPECULATION 

name. In fact, the evidence shows that with their cus- 
tomers they were generahy spoken of as a commission. 
As Richardson, one of the employes, said : 

" Some might call it profits and sometimes it is called a com- 
mission. It is our share for doing the business. It may be that 
it is, in essence, the same as that which the members of the Board of 
Trade charge for commission. It is our compensation for making 
a trade." 

Judge Tuley's Opinion. 

The opinion of Judge Tuley covered twenty-four 
printed pages ; therefore I have selected only such portions 
of it as bear directly upon the bucketshop issue. They 
read as follows: 

" So great an evil had this bucketshop gambling become in the 
city that the General Assembly found it necessary in 1887 to pass 
very stringent laws, to prevent not only the keeping of bucketshops, 
but also ' gambling in stocks, bonds, " '^' '•' grain, provisions 
or other produce.' The keeping of a bucketshop is described as 
the ' keeping of an office, store, or other place, wherein is conducted 
or permitted the pretended buying or selling of the shares of stocks 
or bonds of any corporation, or petroleum, cotton, grain, provisions 
or other produce, either on margins or otherwise, without any in- 
tention of receiving and paying for the property so bought, or of 
delivering the property so sold ; or wherein is conducted or per- 
mitted the pretended buying or selling of such property on mar- 
gins ; or when the party buying any of such property, or offering 
to buy the same, does not intend actually to receive the same if pur- 
chased, or to deliver the same if sold. * ''' -:< ' • 

" The State of Missouri passed similar statutes and equally 
stringent, and so prevalent has this evil become that the betting 
upon the price of grain without the intention of delivery may be 
said to have become the national mode of gambling. * ''' * 
That the Company had a blackboard on which the quotations of 
the markets on the Chicago Board of Trade were registered as 
received ; that tens to hundreds of thousands of bushels of grain were 
bought and sold, mostly in one thousand bushel lots, every day, the 
purchase or sale being made at the ruling price as shown upon the 
blackboard, the customer putting up with such purchase or sale, ten 



BUCKETSHOP METHODS Gi 

dollars with the house of the Christie-Street Commission Company, 
and that when the price went up or down on the customer's bid, as 
the case might be, so as to exhaust the ten dollars, the trade was 
closed. In some cases, but not always, the customer received a 
printed form of a so-called contract, which was as follows : 

(Here the Judge included the form of contract used by Christie 
and set forth in evidence of R. J. Mason, order clerk.) 

" Although more than a hundred of these alleged contracts for 
the purchase or sale of aggregating tens of thousands of bushels of 
grain were given out each day, in no case does it appear that there 
was ever a bushel of grain bought or sold on the Chicago market 
under such contracts. The house took the trade, and although in 
some of the contracts it used it pretended to act as a broker for the 
customer, in no case does it appear that it did so act. 

" The evidence shows that the Christie-Street Commission Com- 
pany never purchased or sold a bushel of grain, although it made 
trades amounting to 157,000,000 of bushels in a year. The evi- 
dence shows that bucketshopping or gambling in prices on ^ the 
Chicago Board of Trade of grain and other products was the main 
business of complainants so far as the dealing in said grain and 
other products was concerned. The printed contract was a mere 
pretense, it was one of the instruments used in carrying on the 
gambling, the quotations being used as dice are used, to determine 
the result of a bet. The, assertion in the contract that it would 
accept business only on the agreement that the property was to be 
delivered or received, as the case might be, and that they would 
not accept business under any other conditions, was a pretense of 
virtue calculated to arouse suspicion in itself. 

" The Court of Appeals in the State of Kentucky, in the case of 
Smith vs. The Western Union Telegraph Company, found in the 
1 6th Arh. & Eng. Corporation Cases, page 227, 84 Kentucky Re- 
ports, 664, where a case similar to the one at bar, gives a definition 
of a bucketshop which could not have more accurately described the 
Christie-Street Commission Company's mode of doing business, if 
that Court had heard the evidence in this case. 

" The Court said as to the evidence in the Smith case : 

'' ' The evidence tends strongly to show that the appellant at the 
time complained of, was not a grain and provision merchant, but 
was the keeper of a bucketshop, which is described as a place where 
the prices of grain, provisions, etc., are posted on blackboards as 
they come in on the ticker. The shop buys or sells indifferently, 
and always at the price appearing for the time being on the black- 



62 GOLD BRICKS OF SPECULATION 

board. Should a customer wish to make a deal in June wheat, say, 
buy one thousand bushels, he sees the last quotation, — say, one 
dollar per bushel, — he gives the shop the margin — say one cent on 
the bushel, or ten dollars. The shop charges a fixed commission 
— say one-quarter of a cent per bushel. The shop does not notify 
the customer of the fluctuations of the market, but he looks out for 
that on the blackboard, \\nieat on the next quotation goes down — 
say three-quarters of a cent — this loss of three-quarters of a cent, 
added to one-quarter of a cent charged for commission, makes one 
cent per bushel on one thousand bushels, or ten dollars. This ex- 
hausts, or " freezes " out the margins. The deal is closed, and the 
shop has made ten dollars'. 

'' ' On the other hand, should wheat advance one cent per bushel, 
he customer would make one cent per bushel, less one-quarter of 
a cent per bushel, the commission, and the shop would lose three- 
quarters of a cent a bushel. 

** ^ It is understood between the customer and the shop that there 
is no actual deal in grain — that there is none to be delivered — but 
that the difference in future prices is simply dealt in. In other 
words, the customer bets the shop that on a certain day in the future 
or in a certain month in the future, wheat will be worth so much, 
and if, at the time agreed, the wheat is worth that much, the cus- 
tomer wins, less the commission ; if it is not worth that much, the 
shop wins.. The quotations are used as basis of this species of 
betting as a gambler uses dice to decide the bet.' 

" T feel disposed to adopt much of the language of that Court as 
applicable to the case at bar. 

*' The Court proceeds : 

" ' As we have just said, in this kind of business nothing is 
actually bought or sold. Xor do the parties intend an actual sale 
of the commodity which they pretend to deal in. They merely 
wager on the market price of the commodity at some specified time 
in the future. A mere statement of the character of business done 
by appellant shows it to be a species of gambling as well defined 
and as reprehensible as that of keeping a faro bank or a dice ma- 
chine, and is therefore illegal and contrary to public policy. 

" ' The question then is, can the appellee avail itself of the fact 
that appellant w^as engaged in an illegal business as an excuse for 
withholding the market reports from him and withdrawing the 
ticker, both of which were used by appellant in carrying on said 
business p ' ^ * * 



BUCKETSHOP METHODS G3 

" * These reports were the essence, the ver}- sinew, of appellant's 
"gambling business, and without the prompt supply of which his 
business was a failure. Can the appellee be compelled to continue 
the sup])ly? A\'e think not.' * "' " ' Upon the ground that ap- 
pellant was engaged in a gambling enterprise, which is contrary to 
law, good morals and public policy. It is for the sake of the law 
and the best interests of society that we relieve the appellee from 
continuing to furnish to appellant the reports.' * * ■■' 

" The appellant in the case from Kentucky was the proprietor 
of what he called a ' Cotton, Stock and Provision Exchange ' for the 
Inlying and selling of grain, provisions, and other merchandise. He 
also had been supplied with the quotations of the fluctuations of the 
Chicago Board of Trade over instruments supplied by the Western 
I'nion Telegraph Company by means of its wires, and a printing 
machine called a ' ticker ' and the Western Union threatened to 
cease to furnish the reports and to deprive it of the use of the 
ticker. Appellant filed his bill to enjoin the Telegraph Company 
from so doing, obtained his injunction, the lower court dissolved the 
injunction and dismissed his petition. The judgment of the lower 
court was affirmed by the Supreme Court for the reasons stated 
(84 Kentucky, 664). 

*' The reasons given for the decision in that case commend them- 
selves to my judgment, and are in the interests of good morals. 

" The amended decisions of the Supreme Court of Illinois in the 
New York and Chicago Grain and Stock Exchange, case 127 Ills. 
ante, holding that so long as the Board, directly or indirectlv, carried 
on the business of collecting and furnishing market quotations, it 
must furnish them to all who may desire to obtain them for lawful 
purposes and upon the same terms — inferentially holds that one who 
desires to use the quotation for unlawful purposes cannot demand 
that they be furnished to him — and is in harmony with the Ken- 
tucky case. 

" The complainant has no standing in a court of equity to compel 
the defendants to continue to furnish it with market reports and 
quotations for the purpose of carrying on the business that he ap- 
pears to have heretofore conducted, and no standing to demand that 
the Board of Trade and the Telegraph Company shall not come to 
an arrangement or understanding by which he shall be deprived of 
the market quotations in question. 

" The injunction issued upon the original bill must be dissolved, 
and it is so ordered." 



64 GOLD BRICKS OF SPECULATION 

This opinion was affirmed by the Illinois appel- 
late COURT IN 1 90 1. 

Following the defeat of the Christie-Street Commission 
Co. in its effort to force the telegraph company and the Chi- 
cago Board of Trade to proxnde it with quotations, the 
bucketshop was reorganized under the name of the Christie 
Grain and Stock Co. The quotations having l)een cut off 
by the telegraph company, Christie had the alternative of 
shutting up his shop or stealing the quotations. Christie 
was not averse to stealing, for, in his own language, 
'' the bucketshop is only a thief," and by ingenious methods 
he proceeded to procure surreptitiously the quotations of 
the Chicago Board of Trade. 

I visited Kansas City in June, 1902, and, with the aid 
of experts, uncovered two of the sources of supply, which 
Christie, by bribing employes of a public building, had 
installed. His scheme was the most clever ever devised, 
and it was only after months of investigation that I was 
enabled to locate the 'leak." For boldness and cunning it 
would put the plot of a " dime novel " to shame. I had 
learned that Christie was receiving the quotations of our 
Exchange by a private telephone, so that the task that con- 
fronted us was the tracing of the telephone wire from 
Christie's office to its source. The only clew we had to 
start with was the glimpse we occasionally could catch 
of a man with a telephone receiver on his head who sat in 
an inner room of Christie's suite of offices on the fifth floor 
of a large office building in Kansas City. The office was 
located more than a block from the Kansas City Board of 
Trade. 

Securing the services of an expert telegraph lineman 
and also of a telegraph operator of long experience, I in- 
structed them to trace, if possible, the wire attached to the 



BOCKETSHOP METHODS 65 

telephone receiver. It looked like an impossible undertak- 
ing, as the point at which this particular wire made its 
exit from the 1)uilding- was made extremely difficult to 
ascertain for the reason that numerous other wires of 
exactly similar appearance were strung into the building 
and all around it. After many days, however, success 
rewarded their search and the wire was traced over build- 
ings and across streets to the roof of the Board of Trade. 
Thence it was followed into the air-shaft, back again up 
the air-shaft, through the garret or space beneath the 
roof, and then down into the exchange room of the board. 
It made a wide circuit and passed under the visitor's gal- 
lery of the exchange room, across a hall-way, and appar- 
ently entered the office of a reputable broker through a 
hole bored in the sash of a window opening into the hall- 
way. But the window was obstructed by a large black- 
board which completely covered that side of the office. The 
tracing of the wire ended at this point as it could not 
be seen or followed after it passed through the window 
sash. It looked exceedingly dubious for the broker into 
whose office the wire entered. Circumstantial evidence 
strongly pointed to his complicity in this scheme to steal 
quotations. He had the private wire of a prominent Chi- 
cago house in his office and over this wire was receiving 
the '' Confiniioiis Quotations" of the Chicago Board of 
Trade. He was also transacting his business with the 
Chicago house over the same wire. The quotations were 
those which Christie wanted and it was evident that he was 
being supplied with them from this source. Without excit- 
ing suspicion, w^e were compelled to prove this, for, we 
argued, if the broker was permitting the quotations to 
go over the wire, he would destroy the evidence of his 
guilt the moment he learned that an investigation was 



66 GOLD BRICKS OF SPECULATION 

being made. With this end in view, we proceeded to ascer- 
tain from the wire itself the true state of affairs. Renting 
a room on the top floor of a cheap lodging-house, we ran 
a wire to the roof through the chimney flue ; then we con- 
nected a wire with the Christie contraband wire which we 
had been tracing. This wire was run to the roof of the 
lodging-house, and was joined to the wire which entered 
our room through the chimney. Thus we had a hrst-class 
connection, or what is commonly known as a " tap," on 
Christie's wire. And with a telegraph operator to listen, 
we expected to learn all about the scheme and the method 
by which Christie receix'ed the cfuotations. Our experi- 
ments with the wire were a revelation. r)y procuring 
a telephone receiver and attaching it to the ends of the 
wire, our telegraph operator was enabled to read all of the 
messages, etc., that were received or sent out by the broker 
in whose oflice the wire apparently terminated. He could 
read the messages not only of this oitice, but also of all 
other offices on the same wire, and interspersed with these 
messages, the continuous quotations of the Chicago Board 
of Trade, as sent out by the Chicago house over its wire, 
could be plainly and distinctly read. This would have 
been the case if the Christie wire had been attached to the 
Chicago wire over which the messages and quotations were 
being sent, as an operator can read telegraphy through a 
telephone attached to a wire quite as well as he can read 
from the ordinary instrument, the pulsations of the current 
on the wire as produced by the opening and closing of the 
sender's key when heard through a telephone receiver 
being similar to the dots and dashes which make up the 
letters and words on a telegraph sounder. 

But other sounds than the current pulsations were 
heard. Conversations carried on in certain ])ortions of 



BUCKETSHOP METHODS 67 

the suspected broker's office could be perceived distinctly. 
This was extraordinary. We were puzzled for several 
days, but in the meantime listened on the wire, making 
copies of messages, etc., which w^e compared with records 
in the Chicago office, thus proving beyond peradventure 
that the Christie office was constantly informed as to the 
business that passed over the Kansas City wire of the 
great Chicago house of Harris, Gates & Co., it being this 
firm's ware w^hich ran into the broker's office. A solution 
finally dawned upon us. We had solved the riddle. 

Christie had a telephone transmitter hidden in the 
office of the broker — a transmitter so delicate as to take up 
the sounds of the telegraph instruments and the voices of 
persons talking above the ordinary conversational tone, 
and convey them to his office, and incidentally, to the occu- 
pants of the room in the lodging-house. 

Our next task was to unearth the telephone transmitter 
and prove at the same time that this was the source of 
Christie's supply of quotations. Employing several respon- 
sible persons, I posted them in the bucketshops in Kansas 
City, which w^ere being supplied with quotations by Chris- 
tie. Then, v/ith a representative of Harris, Gates & Co. 
who had been sent from Chicago for that purpose, I vis- 
ited the broker's office and requested him to silence his tele- 
graph instrument, w^hich he did. The parties who were 
watching the bucketshops reported to me that quotations 
ceased to be received and posted at the moment the broker 
silenced the telegraph instrument in his office. This coiip- 
d'etat removed all doubt as to where and how Christie was 
stealing quotations. But where was the transmitter hid- 
den? Our investigation was not complete until we had 
procured the services of a carpenter who removed the 
blackboard, behind w^hich we found snugly ensconced tzvo 



68 GOLD BRICKS OF SPECULATION 

transmitters of a delicate pattern and foreign make. So 
sensitive were these instruments that they took up the 
waves of sound, even after they had passed through the 
blackboard, and carried them to the eager ears of the lis- 
tening bucketshoppers. 

The next day Christie had the quotations again. I dug 
out two more transmitters hidden in the tiles, of which a 
partition was built, in an office of another broker within 
fifty feet of where the first two transmitters were found. 
The four instruments lie in my vault to-day. Both of the 
brokers were innocent of any complicity in this rascally 
scheme. But two employes of the building lost their posi- 
tions in disgrace. 

The Chicago Board of Trade attacked Christie's right 
to use the stolen quotations and asked for an injunction 
in the United States Court at Kansas City. The injunction 
was granted on July 7, 1902, by Judge Hook. Christie 
appealed, and at the present writing the case is pending 
before the United States Circuit Court of Appeals at St. 
Louis. "^ 

Christie a Unique Character. 

C. C. Christie, of Kansas City, Mo., the controlling 
spirit in the two l)Ucketshop concerns just reviewed, is 
sometimes known as the '' Bucketshop King." He is 

^' Since placing the manuscript in the hands of the puhlisher I learn that 
the Circuit Court of Appeals has reversed the findings of Judge Hook and 
dissolved the injunction restraining Christie from using the quotations of the 
Chicago Board of Trade. I have not been favored with a copy of the decision 
but I gather from newspaper reports that it is based upon the Bucketshop 
Statute of Illinois, the passage of which the Chicago Board of Trade was in- 
strumental in securing in the year 1887. 

I understand that it holds that " hedging " (as described in the articles 
on Exchanges and Speculation) by grain dealers, packers and millers, is gamb- 
ling, in fact all transactions in which there is not an actual delivery of the 
goods, are bucketshop transactions under the Illinois law. 

I am willing to submit the question to the public for its judgment on 
the statements, decisions and evidence contained in this volume. 



BUCKETSHOP METHODS 69 

thought to be weakhy and to have acquired his weakh 
entirely by successful " bucketshopping." There are very 
few men whose own writings can be quoted to condemn 
them; or, in other words, who at some period of their 
lives have vigorously condemned an occupation which they 
afterwards adopt. Yet that is Christie's position. I q'uote 
from his printed address to the legislature of the State 
of Missouri in 1887, when he was a legitimate broker: 

" '^ * * Let us first define a ' bucket-shop.' A ' bucket- 
shop ' is a place wherein are posted, as they occur, the fluctuating 
prices of grains, provisions and stocks in the great exchanges at 
the kading commercial centers. Under the guise of a contract to 
buy or sell one of these commodities, the proprietor of the ' shop ' 
will wager any comer that the price will advance before it declines, 
or will decline before it advances, to a certain named point. Neither 
party ' buys ' anything. Neither party ' sells ' anything. Neither 
party intends either to buy or sell anything. The decision of the 
wager hangs upon a quotation which is made by men engaged in 
actual trade perhaps five hundred or a thousand miles distant, with 
which the bettors have nothing to do and upon which their wager 
exerted no influence. '■' '-^ * 

'* '• ''' * The ' bucket-shop ' has, within a few years past, 
sprung from comparative inconsequence into an institution of 
formidable wealth and threatening proportions. There are nearly a 
thousand in the United States. Every large city in the west has 
one at least. There are ten or more in Missouri. Having banded 
together they sneer at legislation. Grown rich, they scofl:' at an- 
tagonistic public opinion. '•' ■•' '•' 

" '" '" '•' But the ' bucket-shop,' like the lottery, and the faro- 
bank, finds its sole profits in its customer's loss. If its patrons 
' buy ' wheat and wheat goes up, the ' bucket-shop ' loses. 

" And so, like any other professional gambler, the ' bucket-shop ' 
took the $10,000,000 intrusted to it by those who played against its 
game, and entering the markets of the country used this tremendous 
financial engine to force prices downward by every available 
means. * * * 

" '•' * * The second point, that a ' bucket-shop ' is a gam- 
bling house, pure and simple, is a self-evident proposition. The 
travesty of furnishing a bit of paper saying that so much of some- 



70 GOLD BRICKS OF SPECULATION 

thing has been ' bought ' or ' sold ' is gone through with, but noth- 
ing has been bought or sold by the patron of the ' shop ' itself. The 
alleged ' contract ' can legall\- bind no one. No intention of delivery 
upon it exists. Nothing could be delivered upon it if the intention 
did exist. " * ''' 

" '■■ ■•' * Many a ' bucket-shop commission merchant ' would 
hardly know wheat from oats, should he ever see them, and none 
of these ' grain and produce exchanges ' ever had a sample-bag on 
its counters. Their transactions are wagers and their existence is 
an incitement to gambling under the forms of commercial trans- 
actions. The pernicious influences of the gaming houses lately 
driven from the state by the enactment of the legislature are in the 
' bucket-shoj) ' revived to the allurement and enticement of whom- 
soever a thin cloak of respectability and assumption of business 
methods may attract. * '■• '■' The exchange is a huge piece of 
time and labor-saving machinery. Its benefits are universal in their 
spread. While its privileges are valuable, they have been rendered 
so by hard work. Its members are entitled to'the protection of the 
state against thieves, and the ' bucket-shop ' is only a thief. The 
quotations upon which the ' bucket-shop ' trades are the product of 
the labor and intelligence and information of the exchange. The 
exchange gathers its. news at great cost, from all over the globe, 
and disseminates it for public advantage. But its quotations should 
be its own property. They are the direct product of its energy, its 
foresight and its business sagacity. The ' bucket-shop,' at no parallel 
cost, usurps the functions of the exchange and endeavors to secure 
for itself tlie returns for a labor performed by others. Even did it 
use honorable methods with its patrons, it would be a dishonorable 

institution ; using the methods, which it does, it is twice dishonored. 

i:; ;;= * " 

This man, who fifteen years ago wrote " the bucket- 
shop is only a thief," stands before the piil)lic to-day 
branded 1)y his own words. When he wrote about the 
quotations of the exchanges and said, " But its (the ex- 
change's) quotations should be its own property," he stated 
what he knew^ w^as true, and yet he sank to a point wdiere he 
stole this property. But having '' Grown rich he scoffs at 
antagonistic public opinion," to use his own w^ords. 

Now as to his methods. I shall quote Christie's ideas 



BUCKETSIIOP METHODS 71 

as to bucketshop iiicthods fifteen years ago, and then illus- 
trate his later methods as shown l)y some correspondence 
that was handed to me by a prominent grain dealer in 
Chicago: '' Even did it use honorable methods with its 
patrons, it would be a dishonorable institution; using the 
methods which it does, it is twice dishonored." 

WE HAVE NO AGENTS. 

Christie Grain and Stock Company. 

Capital $250,000 Fully Paid. 

Exchange Building. 

Kansas City, Mo., Oct. 14, 1902. 
Diet. W. T. D. 



My Dear Sir : 

I believe a splendid opportunity to make money is by selling 
Chicago December corn. Just at present, there is a bull feeling on 
that may carry price up to 48^ c and possibly to 49c per bushel. 
On any such advance, I want you to be sure and take advantage of 
it by selling some. I believe corn is a sale at to-day's prices, and 
look for it to go to 43c or zi4c and possibly lower, before it again 
strikes 50c ; the fact is, I don't believe it will again see 50c on the 
crop. 

Believing as I do in a break in corn, I expect wheat to be influ- 
enced to some extent, but believe it is a purchase around 68c for 
December, on a decline even to 69c you will find it profitable to com- 
mence buying, taking only so much at first, that you can well afiford 
to double your line, should the 68c mark afterwards be recorded. 

W'e want A'our business, and I assure you that no firm in the 
west has ever been better equipped mechanically and financialh' than 
is this Company. Yours very truly, 

W. T. Dillon. 

This letter was addressed to a gentleman of small 
means in Kansas. Not knowing the dishonorable methods 
of bucketshops, he follow^ed the advice given and on Oc- 
tober 1 6th '' sold '' corn through Christie's bucketshop. 
Corn advanced and the bucketshop won his money. Of 



72 GOLD BRICKS OF SPECULATION 

course it was " very sorry/' as it would have been more 
than pleased to have had the gentleman win its money. 
That is what it was in business for; that is demonstrated 
by Mr. Dillon's grief, as expressed in his letter to the vic- 
tim, who was '' froze out " the day after selling the corn : 

WE HAVE NO AGENTS. 

Christie Grain and Stock Company. 

Capital $250,000 Fully Paid. 

Exchange Building. 

Kansas City, Mo., Oct. -17, 1902. 
Diet. W. T. D. 
Mr 



Dear Sir : 

Well, old friend, we got in wrong this time, even though your 
corn was sold at what seemed to me an outrageous high price last 
evening. We had an old fashioned runaway market to-day and 
there is no doubt that the December option is controlled by parties 
strong enough to do as they please with it. and it would be folly for 
any one to mix up with them, and we will not accept any new busi- 
ness in the December option. 

The advance in December corn came so quickly that I did not 
have time to try and reach you b\' wire, but along with all other open 
trades, the margin clerk had a stop order on yours, and it went out 
before we could turn around. I am sorry that our new start in 
doing business together should result in this manner, but I feel there 
is no doubt before long corn will have a severe break, and if you 
are prepared to do so, I would like to see you sell the May option, 
if it should be pulled up to 45c in sympathy with the December 
manipulation. This is far enough off to be out of reach of the Chi- 
cago skinners, and I feel that in a short time it will make up your 
loss, and give you a good pot of money besides. 

Yours truly, 

Christie Grain and Stock Co., 
By W. T. Dillon. 

P. S. : Your stop order was in at 52/8-3. but the market jumped 
over it and 53 w^as the best we could do. 

Every cent lost by this man went into the coffers of 
Christie's bucketshop. Can a more cold-blooded system 



BUCKETSHOP METHODS 73 

of robbery be conceived? Here we have a man unac- 
quainted with trading methods, duped into accepting the 
advice of a bucketshop, which, if it can induce him to 
trade with it, will gain all that he loses, or lose all that he 
gains. 

Are these methods '' twice dishonored " ? 



74 GOLD BRICKS OF SPECULATION 



CHAPTER III. 

THE F.UCKETSHOPPEK. 

AI y experiences with William Rodman Hennig, bucketshop-keeper, 
showing how far the accomplished confidence man will carry a 
" blufif " and the tremendous influence which he can purchase 
with his ill-gotten gains, rendering it practically impossible to 
either break up his swindling game or to loring about his pun- 
ishment. 

In 1894 the subject of this sketch appeared in Chicago 
with assets, in unset diamonds, of several thousand dol- 
lars. Rumor was so unkind as to intimate that there was 
a blank in his career and that the police of an eastern city 
had considered his presence there undesirable. His in- 
clinations were certainly those of the confidence man and 
his first venture here was indicative of his natural ten- 
dency. Forming an alliance with one Thomas Gibson, 
William Rodman Hennig began operations as keeper of a 
'' tape " or fictitious stock game. The police promptly 
closed the joint and Hennig and Gibson incorporated the 
'' Equitable Produce and Stock Exchange " and embarked 
in the bucketshop business under that title. 

The " Equitable " prospered and from a basement of- 
fice in the old Grand Pacific Hotel it was moved in the lat- 
ter part of 1895 to the Omaha Building, at \^an Buren 
street and Pacific avenue. Preparations wxre made for 
an extensive business, and private w^ires extending west 
across Illinois and Iowa and east into Indiana, Ohio and 
Michigan were leased. An office force of more than 
twenty male and female clerks, book-keepers and telegraph 
operators w^as employed. A daily market paper was 



THE BUCKETSHOPPER 76 

printed and the concern ran its own printing office. 
Branch offices were opened at thirty or forty points along 
the private wires, and the situation looked exceedingly en- 
couraging from the point of view of the bucketshop-keeper. 
This particular line of swindling had been operated in Chi- 
cago without interference for several years prior to 1896, 
and all the l)ucketshops were in a prosperous condition. 
Hennig had every reason to anticipate lucrative returns 
from his venture and was not disappointed, for he quickly 
built tip an extensive country and city trade, and Iw bold 
and unscrupulous manipulation of quotations was reaping 
a rich harvest from the so-called traders who played his 
game. 

On February 29, 1896, a thunderbolt struck the bucket- 
shops of Chicago. Two hundred and eighty-one persons, 
including Hennig, his partners, and all their employes, 
were indicted by the grand jury for keeping bucketshops. 
The effect of the wholesale indictment of these fraudulent 
brokers was to drive many of them out of the city and to 
reduce the number of concerns of this character operating 
in Chicago by one-half. I had procured the evidence and 
presented it to the grand jury. It required three months' 
labor and I had to employ ten persons to visit the shops 
and make trades. But the most difficult task was to ascer- 
tain the correct names of the principals and employes for 
the purpose of naming them in the indictments. This 
latter obstacle was overcome, however, in a satisfactory 
manner, but the indicted persons will never know^ how^ so 
accurate a list of their names and vocations w^as furnished. 

The blow to Hennig and his " Equitable Stock and 
Grain Exchange " was a severe one. But to men of his 
class, resourcefulness is a highly developed characteristic, 
and Hennig was not lacking in it. Within two weeks 



76 GOLD BRICKS OF SPECULATION 

after the wholesale indictments, he was promoting an in- 
dependent stock and grain exchange, or board of trade, in- 
tended to be a clearing-house for all the biicketshops in 
Chicago that had weathered the storm, but particularly 
designed to put Hennig at the head of the fraternity and 
give his bucketshop an appearance of legitimacy that 
would render conviction in State and Federal courts more 
difficult. 

Ry leasing almost three entire floors of the Omaha 
building, he induced the management of the l)uilding to 
change its name to the " Consolidated Exchange Building/' 
He then proceeded to remodel the banking floor into a 
trading hall, or exchange room, for the '' Consolidated 
Produce and Stock Exchange of Chicago," which was the 
name selected for the exchange. 

This prince of fakers, lacking in reputation, and con- 
ducting a so-called business prohibited by the gambling 
laws of Illinois, and with consummate nerve and brazen 
effrontery as his only recommendation, asked the public 
to join with him in establishing an exchange. The news- 
papers, or such of them as would accept his advertising, 
contained on the last days of March, 1896, announcement 
of the proposed new board of trade in the following form : 

CONSOLIDATED PRODUCE AND STOCK EXCHANGE OF 

CHICAGO. 

For the benefit of our present and prospective members, and in 
reply to many requests for information from the trading public gen- 
erally, the directors of the Consolidated Produce and Stock Ex- 
change of Chicago make the following statement : 

The Consolidated Produce and Stock Exchange is a corporation 
under the law of Illinois creating corporations not for pecuniary 
profit, and was organized to meet the pressing demands of several 
hundred traders and dealers in stocks and grain, who became satis- 
fied that the present facilities for legitimate transactions in stocks, 



THE BUCKETSHOPPER 77 

grain and provisions upon commercial exchanges are inadequate to 
the growing demands of trade. 

The ConsoHdated Produce and Stock Exchange is so organized 
that stocks, securities of all kinds, and grain and provisions may be 
dealt in and handled on the floor of its exchange hall by and between 
members under rules, regulations and by-laws of the most approved 
character. Such rules, regulations and by-laws will be so framed 
and enforced as to secure the prosecution of legitimate enterprise, 
and to guarantee ta customers absolute fairness and strict integrity 
in every transaction. The history and methods of all successful 
exchanges have been carefully considered, and every rule and. pre- 
caution calculated to promote equity and justice among merchants 
in fair and open markets will be adopted and will be rigidly and 
impartially enforced. No transaction and no dealings which are 
either in fact or in name branded and discountenanced as illegiti- 
mate or illegal will be permitted under any circumstances. The 
trade in what are commonly known as "puts and calls" or privi- 
leges, will be resolutely prohibited at all hours and under all circum- 
stances. 

Any member of this exchange who shall be detected in handling 
or dealing in such privileges will be summarily denied the privileges 
of the exchange, and either suspended or expelled from membership 
therein and every precaution which can.be suggested or invoked for 
the purpose of protecting its members and the public who deal upon 
the exchange will be taken. Legitimate transactions onlv will be 
countenanced and anything which savors of any act or thing in vio- 
lation of law and good morals will be unhesitatingly forbidden and 
prohibited. The limit of membership has been fixed at fifteen hun- 
dred, and three hundred members will be admitted to the privileges 
of the exchange upon the payment of fifty dollars each, with reason- 
able annual dues, to be fixed in the immediate future. There have 
already been received more than twice three hundred applications 
for seats in this exchange ; but none of such applications have yet 
been acted upon because it is the desire of the directors that the 
greatest care shall be exercised in the selection of any and all mem- 
bers who shall be entitled to privileges such as will be guaranteed 
by the Consolidated Produce and Stock Exchange. 

The hall of the exchange will be located in what is now known 
and designated as the " Consolidated Exchange Building," at the 
southeast corner of Van P>uren street and Pacific avenue — and for- 
merly known as the Omaha building — and contracts for the remod- 
eling and furnishing of the exchange hall have alreadv been let, and 



78 GOLD BRICKS OF SPECULATIOX 

the exchan,2:e room will be ready for use and occupation about April 
15, 1896. The offices of the president and secretary of the exchange 
will be ready within a few days, and all information respecting 
applications for membership, with necessary blanks, may be obtained 
by addressing the secretary. Any other information respecting the 
progress of this enterp'-ise may be obtained either from the Chicago 
daily papers or upon application to the secretary at any time. The 
temporary office of the Consolidated Produce and Stock Exchange 
is at room 103, Consolidated Stock Exchange building, where all 
inquiries and applications should be addressed. 

William Rodman Hennig, President. 

Samuel J. Vinnedge, Vice-President. 

C. B. Cooper, 

M. Bates Iott, 

T. Lloyd Carey, 

David Gage Maxwell, 

Charles R. Jacobs, • 

Directors. 

Thomas Gibson, Secretary. 

The following- '' ad " was inserted in all the Chicago 
papers that would accept it for some weeks prior to the 
formal opening* of the "Consolidated Produce and Stock 
Exchange : 

CONSOLIDATED PRODUCE AND STOCK EXCHANGE. 
To THOSE INTERESTED in Speculation and hivestment in Stocks, 

Bonds, Grain and Provisions in a Legitimate Way 

The Consolidated Produce and Stock Exchange offers the 
greatest inducements and opportunities for fair dealing and 
prompt service ever given to the trading public. 

Brokers, 
Join the Consolidated Produce and Stock Exchange now. It is im- 
possible for you to lose money through dishonest or insolvent 
brokers, as ez'ery trade is certified through the clearing house. Read 
our by-laws. They are superior to those of any exchange in the 
United States. We will trade in and deliver every commodity 
known to speculation. \\Tite for particulars. No high-salaried 
officers. No load of indebtedness. The executive offices are now 
open and all applications for membership will receive prompt atten- 
tion. The exchange proper will open to members probably May 



THE BUCKETSIIOPPER 79 

15th. Application blanks and copy of constitution and by-laws 
mailed free upon request. 

Consolidated Produce and Stock Exchange, 

Consolidated Exchange Building, Chicago. 

On May 15, 1896, Hennig launched his new exchange. 
With the exception of a very few broken down bncketshop 
men, there was no support even from that element. But 
Hennig was equal to the emergency, and emplo}'ing fifteen 
or twenty young men at $10 a week, he placed them in the 
trading pit built in the large exchange room, with instruc- 
tions to make a noise, trade back and forth among them- 
selves, and give the room the appearance of a real live 
exchange. 

He established several firms in addition to his original 
bucketshop, the " Equitable Produce and Stock Ex- 
change,'' and they all advertised as members of the Con- 
solidated Produce and Stock Exchange of Chicago. 

There never was any trading of a legitimate character 
on the Exchange, Hennig's employes merely making a pre- 
tense of buying and selling, with as much noise as possible. 
Trades were accepted at the counters in the bucketshops 
just the same as before the trading hall was fitted up, and 
the blackboards bearing the New York Stock Exchange 
and Chicago Board of Trade quotations V'Cre the basis of 
all the business. 

In a few months all but four of the fake brokers wxre 
discharged, and while the pretense of an exchange was 
kept up for two years, the elaborate machinery v/as aban- 
doned and Hennig, like all bucket shoppers, found that 
there w^as just one zvay to run a bucketshop. 

Hennig soon proved himself to be a " free spender," 
a " hale fellow^ well met," and an accomplished " mixer.'' 
He broke into a prominent club and into one of the 



80 GOLD BRICKS OF SPECULATION 

most exclusive lodges in the city. At the horse show, 
rubbing elbows with the millionaires of Chicago, he cap- 
tured one of the prizes. The yacht clubs competed for a 
cup offered by him. 

The colossal nerve of Hennig is something that is be- 
yond my ability to describe; it was one of those rare, in- 
explicable gifts which we occasionally meet Avith in human- 
ity. Fancy the man's state of mind when he indited and 
mailed me the following letter : 

July 13, 1896. 
Mr. John Hill, Jr., Room 2, Board of Trade, City. 
Dear Sir : 

Being' desirous of protecting the interests of our members, as 
well as promoting the welfare of all other exchanges doing a legiti- 
mate business, we heartily indorse the action taken by the members 
of the Chicago Board of Trade, most notably by yourself and Presi- 
dent Baker, and the Civic Federation, in their effort to break up the 
bucketshop element in this city, as well as to suppress the illegal 
traffic in privileges. As a further and more substantial evidence 
and earnest of the sincerity of the officers and members of this 
exchange in this matter, we pledge ourselves to pay into your hands 
for the bucketshop fund the sum of one thousand ($1,000) dollars, 
and we will pay the same to any memher of the Civic Federation on 
presentation of an order properl\ signed by its officers authorizing 
the collection of the above mentioned sum to be used for the pur- 
pose stated. We beg to remain 

Yours very truly. 
The Consolidated Produce and Stock Exctiange. 

William Rodman Hennig, President 

T had already procured his indictment on two occasions, 
and he knew^ that of all persons / 7vas the last to be misled 
by his false pretenses. My theory has always been that 
the wTiting of such a proposal could be ex])lained only by 
the hypothesis that the accomplished confidence man is 
so constituted that it never occurs to him that anyone 
whom he tries to deceive can doubt his honesty of purpose. 



THE BUCKETSHOPPER 81 

For the two and a half years following there was a 
fierce war waged between Hennig, and all such persons as 
his money could command, on one side, and myself, backed 
by the Civic Federation and the Board of Trade, on the 
other. When I finally succeeded in landing him in jail in 
December, 1898, he had practically exhausted his re- 
sources and was thoroughly discredited. 

With the establishing of the " Consolidated Produce 
and Stock Exchange of Chicago " in 1896, it devolved 
upon me to procure the evidence of its illegitimacy, \\liile 
satisfied on that point myself, the task of proving it to 
judges and jurors was a difficult one, for I was obliged not 
only to demonstrate that the trades on the so-called '' Ex- 
change " w'ere fictitious, but also that the Hennig concerns 
were bucketshops, and this to persons unacquainted with 
the customs and usages of the grain and stock business. ^ 

By the close of 1896 I was in possession of the evidence, 
but owing largely to the system at that time in vogue 
of draw^ing grand jurors I was unable to proceed in the 
State courts. It had been a custom for some years for 
each grand jury to appoint a committee of their number to 
investigate bucketshops. This had led to several scandals 
and charges of blackmail, and as the jury was made up of 
persons who sought the privilege of serving, it was not 
surprising that these committees were in some instances 
charged with trying to levy blackmail. 

A committee of the November (1896) grand jury 
called on me relative to the bucketshop evil, but, being sat- 
isfied as to their lack of desire to understand the situation, 
I withheld the evidence in my possession. But I did ex- 
plain to them how to proceed in order to procure sufficient 
evidence to indict. After visiting me they called at the 



82 GOLD BRICKS OF SPECULATION 

offices of Heiinig and his exchange and were treated very 

courteously. In heti of recommending an indictment for 

keeping a bttcketshop, they soon after the adjournment of 

the grand jury presented Hennig with a certificate of good 

character, as follows : 

Chicago, Dec. 5, 189b. 
Mr. U'ilUani R. Ilcnnig, President ilie Consolidated Prod nee and 

Stoek ExeJiange. 
Di:ar Sir : 

It is projicr, as well as my duty, as cliainiian of the coininittee of 
the November grand jury, to say that the committee appointed for 
the investigation of bucketshops, etc., was made up of business men, 
who spent their time and money without fear or favor, in the in- 
terest of civic reform, and, owing to the aiherse reports, the com- 
mittee made a rigid and searching examination of the Equitable 
Produce and Stock Exchange, and the Consolidated Produce and 
Stock Exchange, and find as you will see from the enclosed report 
to Hon. Jonas Hutchinson, Judge of the Criminal Court of Cook 
County, that the above concerns, of which you are president, are in 
no" sense bucketshops, or even savor of the stigma any more than 
the Board of Trade. That the committee regards your companies 
as among the leading concerns in America. The committee unites 
with me in these expressions. 

A. F. Dreutzer. 
State ok Illinois, ) 
County of Cook, f ^ ' 

J. D> CuRTiN, L. \V. Ferguson, Nicholas Lew^s, L. Easton, 
M. E. Crown, M. Rogerson, William McGurn, Daniel En- 
right, being duly sworn, depose and say that w-e, the undersigned, 
members of the November (1896) grand jury, and deputed as a 
committee to investigate bucketshops, wish to certify that we visited 
the trading hall of the Consolidated l^roduce and Stock Exchange, 
Rowe & Co.. and Hennig & Co., cash grain merchants, and members 
of the aforesaid Consolidated Produce and Stock Exchange, and 
after a careful investigation we found their methods to be legitimate 
and similar to those of the other exchanges of Chicago. They satis- 
fied us that they w^re transacting their business through brokers on 
the floor of the said exchange, and that they handled cash cereals and 
securities. We can see absolutely no difference in their business 
methods and those of the Chicago Board of Trade, or any other 



THE BUCKETSHOPPER 83 

legitimate exchange. We found the officers of the exchange ready 
to further our investigation in every way. 

A. F. Dkeutzkk, 

J. D. CURTIN, 

L. W. Ferguson, 
L. Easton, 
M. E. Crown, 
M. Ro(;ers()n, 
William McGurn, 
Daniel Enrich t, 
Nicholas Lewis. 

The people of Cook County are to be congratulated on 
the passing of a system of drawing jurors that encouraged 
such abuses as the above statement (which was published 
broadcast and repeatedly by Hennig) discloses to the aver- 
age mind. For, while it was evidently signed, sealed and 
delivered to Hennig voluntarily and without a consider- 
ation, solely out of kindness of heart on the part of the 
committee, it was a sad commentary on the intelligence 
and good judgment of the gentlemen selected to investi- 
gate violations of the law prohibiting bucketshops. Since 
the jury law, which soon after went into foi'ce, has been 
in operation, such scandals are unknown. 

Early in 1897, at the request of citizens of Iowa, I pre- 
sented evidence to the grand juries of three counties in 
that state in which Hennig had agencies or branch offices 
on his private wires. In one county Hennig retained as 
counsel the partners of the county attorney and T failed to 
get an indictment. In the other two counties indictments 
were promptly returned against him and his partners for 
'' keeping a bucketshop " and '' obtaining money by false 
pretenses." As the defendants were residents of Illinois, 
the governor of Iowa, at the request of the county attor- 
neys, issued a requisition on the governor of Illinois for the 



84 GOLD BRICKS OF SPECULATION 

persons named in the nidictment. The then governor, 
Tanner, refused to honor it. 

Hennig grew bolder and more boastful with each suc- 
cess. He claimed to have a million dollars and to be mak- 
ing vast sums from month to month. He bought a weekly 
publication and devoted its whole space to his advertise- 
ments and to abuse of me. Each entire edition was mailed 
by him to the sections in Vv hich he had l^ranches, and locally 
in Chicago. 

Carefully perfecting my plans, I succeeded in inducing 
the police to raid his shop in August, icS(;7, and tipon his 
reopening I had him raided again within three days, this 
time by constables. In the last raid T procured the evi- 
dence necessary to prove his methods beyond a possibility 
of doul^t, and a constable was appointed custodian of the 
papers and books by a justice of the peace, before whom 
the prisoners and proceeds of the raids w^ere brotight. The 
constable found it convenient to change his residence very 
unexpectedly within a few days. When ready to move, 
he carried the sacks containing the books and papers to the 
sidewalk, and just at that moment Hennig's attorney drove 
up in a carriage, seized the papers on a writ of replevin, 
and the evidence was again in Hennig's possession. Of 
course the constable never explained the strange coinci- 
dence of his moving just at the moment that the replevin 
writ arrived. This affair occurred before seven o'clock 
in the morning and was evidently intended to be accom- 
plished before business hours. 

On the day of the last raid Hennig and some of his 
employes swore out warrants for the arrest of myself and 
several of my assistants. There were four charges 
against us before two justices. One justice court was 
located six miles w^est of the business center, the other 



THE BUCKETSHOPPER 85 

twelve miles north, in a suburban town. One justice 
heard the case only partially and then dismissed the 
charges. The other waded patiently through the evidence 
of about twenty-live witnesses ; among them were Hennig 
and his partners and employes. The charge was con- 
spiracy to injure the business of the " Equitable Produce 
and Stock Exchange." I had Hennig and his partners 
and employes subpoenaed, and here are extracts from 
Hennig's testimony: 

WILLIAM R. HENNIG'S TESTIMONY. 

Q. — " What is your full name? " A. — " William R. Hennig." 

Q. — *' ]\lr. Hennig, what is your business ? " A. — " I am presi- 
dent of the Consolidated Produce and Stock Exchange." 

Q. — *' Is that all?" A. — "I am interested in several other 
lines." 

Q. — "What other business?" A. — 'I am a member of the 
firm of W. R. Hennig & Company." 

Q. — " Anybody else, Rowe & Company? " A. — "That's all." 

0. — " Were you ever connected with Rowe & Company? " 
(Objected to.) 

Q. — " That little shop downstairs at 134? " 
(Objected to.) 

Q. — ''Do you refuse? " A. — " I refuse to answer that question, 
as the answer may incriminate me. That case is pending in court." 

Q. — " LTpon the advice of your counsel ? " 

Mr. Brady : " Don't answer that question." 

Mr. Proudfoot : '' Now, will you describe briefly what busi- 
ness you do on the Consolidated Produce and Stock Exchange ? " 

A. — " The Consolidated Produce and Stock Exchange is a cor- 
poration acting under a charter drawn identically on the same lines- 
as the Board of Trade." 

Q. — ''You know better, don't you?" A. — "Do you want me 
to go on and tell you what you asked me ? " 

O. — " No.; I want to spare you as my witness in saying any 
such thing as that when either you are grossly misinformed or you 
are grossly prevaricating when you say that the Consolidated Pro- 
duce and Stock Exchange proceeds under the identical charter of 
the Board of Trade." A. — " The Consolidated Produce and Stock 



86 GOLD BRICKS OF SPECULATION 

Exchange is a corporation operating under a charter without a 
financial pohcy and having no pecuHar benefits, for the purpose of 
promoting legitimate speculation in stocks, bonds, grain and pro- 
visions." 

O. — " That is the purpose of the charter? "' A. — " The charter 
is identical with that of any club or any association that operates 
under a charter without a financial policy." 

O. — " Now you say that you are operating under that charter — 
are you so operating? " .\. — " We are." 

O. — " What do you do there on that board — on the Stock and 
Produce Exchange ? " 

(Objected to: objection sustained.) 

O. — " \\'ere you ever connected with a commission firm, so- 
called, alleged to be, known as Rowe & Company?" 

(Objected to on the ground that the witness has already an- 
swered or declined.) 

O. — " Are you acquainted with the so-called ])ress of W. R. 
Hennig & Company?" A. — " I don't know of any press of W. R. 
Hennig & Company." 

O. — "They do their printing there, don't they?" A. — "What 
do you mean? Explain yourself." 

O. — "Now, I will show you — I want tt) be fair — now, on the 
bottom of some of the slips is the * Press of W. R. Hennig & Com- 
pany.' " A. — " What slips? '' 

Q. — " Well, for instance, your buying and selling slips? " A. — 
'* Well, I don't know what you mean. I don't buy or sell any slips — 
slippers, or something of that kind." 

O. — " I want you to look at that, and ask you what it is. What 
is that, 'Press of W. R. Hennig & Co.'?" A.—" That is very 
simple — some contracts I got there." 

O. — " Do you see that name at the bottom there — ' Press of W. 
R. Hennig & Company'?'' A. — "I could not see. That is very 
small, I cannot see that fine print." 

O. — " I will read it to you :' ' Press of W. R. Hennig & Com- 
pany.' What is that?" A. — " I don't know what it is." 

O. — " In the interest of your concern did you publish and print 
what they call the ' Ticker '? " A. — " I refuse to answer that ques- 
tion." 

O. — "You refuse to answer it under what — same ground?" 
A. — " Same groimd." 

0. — " It might tend to incriminate you ? " A. — '' Yes." 



THE BUCKETSilOFFER 87 

Q. — ** W'ill you kindly tell me who the members of the firm of 
William R. Hennig & Company are? " 

(Objected to, as immaterial and irrelevant. Mr. Gibson has 
already testified to that.) 

Q. — " Was Stratton also a member of that firm? " A. — " Strat- 
ton was never a member of the firm." 

Q. — "When did he withdraw?" A. — "I don't remember." 

Q. — *' How long ago did he withdraw? " 
(Objected to.) 

A. — " I refuse to answer." 

O. — " My question is prefaced with the remark on or before 
the 20th of August." A. — " Mr. Hennig, Stratton and Chandler." 

O. — " When did Stratton draw out? " A. — " I refuse to answer 
that question." 

O. — "Why?" A. — "Because it might have a tendency to in- 
criminate me." 

O. — " In other words — " A. — '' I don't care to answer." 

Q. — " — in other words, Stratton made up his mind he could 
not stand it any longer and he got out ? " 
(Objected to.) 

O. — " Mr. Witness, are you cognizant of the fact that a bill for 
injunction was filed in the Circuit Court the 8th day of September, 
1897, "^ which the firm are enumerated William R. Hennig, Thomas 
Gibson, W. S. Chandler and Oliver R. Stratton? " 
(Objected to.) 

Q. — " Yet this man says that this man Stratton was not a mem- 
ber of the firm." A. — *' I never made any such statement, that 
O. R. Stratton was not a member of that firm on the 8th day of 
September. I have the counsel to thank. We made a settlement 
with Mr. Gibson up to the 20th day of a certain month. It stated 
that O. R. Stratton, William S. Chandler and myself were members 
of that concern at the date of the settlement. I could not remember. 
I am here to tell the truth, not to wilfully falsify." 

Q. — " Do you mean to say that Oliver R. Stratton did not be- 
come a member of William R. Hennig & Company until about the 
20th of August. 1897? " 
(Objected to.) 
Q. — '' If he was a member of that? " 
(Objected to.) 

O. — '' Then, I understood you to say, Mr. Witness, that Mr. 
Stratton was not a member of this firm prior to the 20th of Au- 



88 GOLD BRICKS OF SPECULATION 

(Objected to.) 
O. — " Do you claim a privilege on that? '' 

(Objection overruled.) 
O. — "Did you say that?" A. — "I made no such statement." 
O. — " Is it a fact or not? " 

(Objected to.) 
Q. — " I will ask you since the disposal of the Equitable Produce 
and Stock Exchange to the successor as W. R. Hennig & Company, 
who were the members of that firm up lo the 20th of August ? " 
(Objected to; objection overruled.) 
A. — '' O. R. Stratton. Thomas (iibson, William P. Chandler and 
myself were members of that firm." 

0. — " These were all the members there were in there? " A. — 
" I didn't say so." 

O. — "Were there any other members than those in there?" 
A. — " The four people that I have mentioned were members of 
the firm." 

O. — "Were there an)- others besides the four?" A. — "No, 
sir." 

O. — " Who published and printed the ' Ticker '? " 

(Objected to for the same reason that it would incriminate 

him.) 
(Cross-examination waived.) 

It required several days to hear this case. At its close 
the justice held myself and three employes to the grand 
jury in bonds of $1,500 each. Things were coming Hen- 
nig's way, but evidently he was lavish with the " sinews of 
war." 

Anticipating that when again at leisure T might inter- 
fere with his " business," he procured in Se])tember, 1897, 
an injunction in the Circuit Court of Cook County, re- 
straining me from interfering with "his " business " by 
raids, etc. Sixty days elapsed before I could get a hearing 
on the injunction, but as soon as the judge heard it, he dis- 
missed the case and assessed damages against Hennig. 
At the same time Hennig filed another bill in the Superior 
Court, but it was dismissed immediately and Hennig was 



THE BIJCKETSHOPPER 89 

cited before the judi^e who had dismissed the original bill, 
for contempt of court. This was quickly fixed up by ex- 
planations of attorneys. 

In October, 1897, while the injunction was in force, 
the justice court conspiracy case against myself and em- 
ployes was on the grand jury docket. I was also before 
the grand jury with evidence and witnesses against Hen- 
nig and his associates for " keeping a bucketshop " and for 
"keeping a common gaming house." The grand jury 
heard the evidence against both parties to the controversy, 
and returned six indictments against Hennig, his three 
partners and nine employes, as well as against the tw^o cor- 
porations, the '' Equitable " and " Consolidated " Ex- 
changes. But after listening to Hennig and his witnesses 
testify against me, the jury voted a " no bill.'' Hennig 
had reached a turning point in his career. He was now 
beyond the point where he could use money to advantage, 
but upon various pretexts his attorneys succeeded in de- 
laying the trial in the Cook County Criminal Court for 
almost nine months, and it w^as not until July, 1898, that 
he and his associates faced a judge and jury. The trial 
was important and hard fought, requiring eight days, dur- 
ing w^hich the jury was kept in charge of a bailifif, and the 
members w^ere not allowed to go home. A verdict of 
guilty w^as promptly returned, and the judge later imposed 
the extreme penalty — $500 fine against each of the four 
partners in the concern. The employes, though convicted, 
wxre allowed to go on a suspended fine of $200 each. 

The trial of Hennig in the Criminal Court inspired the 
following editorial in the Chicago Journal of July 16, 1898: 

MORALS OF THE BUCKETSHOP. 
Not gifted with an aptitude for fine distinctions, Charles Green 
of York, Neb., 72 years old and hard-working all his life, failed to 



90 GOLD BRICKS Of SPECULATION 

distinguish between the stock exchange and a Chicago bucketshop. 
He had $700, earned by hard labor, and saved by harder economy, 
and wanted to increase it, Hke many another. 

He came to Chicago and began " tradmg " through a concern 
whose proprietors are now on trial for conducting a bucketshop, 
and, wonderful to relate, he doubled his money — on paper. 

He made no mistake by " overstaying the market/' but when he 
attempted to withdraw the money he had earned and the money he 
had won, he declares the proprietors paid him a few small fractions 
of what they owed him and then turned on him and called him a 
rogue and a swindler. Since that time this gray old man has 
lingered in Chicago, *' homeless and in penury," waiting for his 
money and for the time to testify against the indicted " brokers." 

This story may not be true, or it may be refuted by later testi- 
mony, or juggled out of its real significance by some cunning lawyer, 
but substantially it is what old Charles Green swore to on the witness 
stand yesterday, and it is typical of bucketshops, bucketshop-keepers 
and bucketshop victims. 

The bucketshop victim is a hopeful wretch. He pursues his 
hollow object with the devotion an opium eater has for his drug. 
I>ut he rarely gains it. Sometimes lie wins a small sum, and the 
proprietor always knows he will come back with it. \Mien he wins 
a large amount the keeper evades settlement — perhaps he drives his 
dupe awa\- with revilings, as old Charles (ireen says he was driven 
away. 

In the long run, practically speaking, it is impossible to win, 
because the keeper won't allow it. He has the customer's money 
when the market is with him, and when it goes against him he can 
always fail. 

There are no assets in a bucketshop. There is no bottom to the 
bucketshop and no bowels of mercy in the bucketshop keepers. 
They are among the most heartless, rapacious and cruel harpies that 
prey upon the deluded poor. 

In April, 1898, Hennig, Gibson, Stratton and Chandler 
were indicted by the Federal grand jury for fraudulently 
using the mails. I had procured the evidence against 
them and I was the chief witness before the grand jury. 
The trial was set for December 2, 1898, and when the case 
was called, Hennig and his three partners surprised me 



THE BUCKETSHOPPER Dl 

by entering- a plea of g'uilly. On the same day Judge 
Grosscup imposed, besides $500 fines, jail sentences of nine 
months each upon Hennig and Gibson. That was the first 
time that imprisonment had been metecl out to bucket- 
shoppers. 



PART II 



Get-Rich-Quick" and Investment Swindles. 



CHAPTER I. 

INTRODUCTORY. 

How the mania to '*' get-rich-quick " destroys ordinary caution ; the 
absurdity of the swindler's offers to make money for the pubhc ; 
warnings and exposes do not check the swindles; enormous 
losses borne by the people and how the funds are spent. 

One hundred million dollars annually is about the sum 
that this highly civilized nation- is contributing to the '' get- 
rich-quick " and '' safe-investment " swindlers. 

While I do not anticipate that the public will heed the 
warning, I believe an expose, such as I am in position 
to make, may have the effect of at least arousing the post- 
office authorities and the press to a realizing sense of their 
duty in the premises. 

The public, so far as the swindlers are concerned, in- 
cludes all classes, from the laundress to the lawyer and 
clergyman and merchant. It dwells on the farms, ranches 
and plantations, and in every hamlet, village and city of 
this broad land. But distance is quickly bridged by Uncle 
Sam's fast mail, and the public's money flows incessantly 
into the '^ get-rich-quick '' specialists' hands, through that 
artery. 

Of the vast sum wrung from the thrifty by false pre- 
tenses, about twenty millions are spent for newspaper ad- 

93 



M GOLD BRICKS OF SPECULATION 

vertising, about an equal amount for postage stamps, and 
vast sums for blackmail, attorneys' fees, circulars, book- 
lets, stenographers, clerks, telegraphing and for furnish- 
ing suites of of^ces. The swindler is usually a reckless 
spender and squanders his ill-gotten gains. 

I do not believe th^t anyone has ever been in a position 
to make a more careful or systematic investigation of 
fraudulent methods of getting the public's money than 
that which I have made in the past eight years. The in- 
vestigations were semi-official and made under favoral)le 
conditions. J have carefully kept records of important 
cases, prosecuted scores of fraud cases in behalf of the de- 
frauded parties, and, for the purpose of ridding Chicago 
of this class of vampires, in the interests of legitimate 
brokers and the Exchanges. 

In the year 1895 conditions had become intolerable by 
reason of the great number and variety of the '' get-rich- 
quick " schemes and bucketshops operated in Chicago. At 
that time I was a director of the Board of Trade and was 
appointed on a committee to investigate and prosecute the 
fraudulent concerns. Without intermission, I have fol- 
lowed up this line of work ever since, and have had occa- 
sion to examine into the methods of more than fifteen hun- 
dred schemes to defraud the public. While the schemes 
are limited in variety only by the number of subjects upon 
which it is possible to found a sw^indle, the vast majority 
of them are based on an active speculative or investment 
market, such as the Chicago Board of Trade or New York 
Stock Exchange. The reason is apparent. Most persons 
are aware of the fluctuations and opportvmities in these 
two great markets, and very frequently read of large sums 
of money being made by shrewd speculators as the result 
of careful and fortunate investment in grain or stocks. 



" GET-RfCH-QUICK " SJVfXDLES 95 

Hence, unscrupulous knaves 1)ent (3n preying upon the un- 
wary and inexperienced, paint for' them a ros}^ word- 
picture of the great fortunes that can be made in grain 
and stocks by an easy and safe — absolutely safe — 
METHOD of speculating according to '' their system " which 
is the " restilt of years of experience and study " on the 
part of these rogues, who, ha\'ing perfected their '"abso- 
lutely SAFE system," are anxious to " take in '' the dear 
]jublic in any sum from $io up. They are willing to allow^ 
any person to share in the profits of the gigantic deals 
which they contemplate in the near future, and assure him 
of the certainty of weekly or monthly dividends that are 
so absurd as to stamp the scheme as fraudulent to anyone 
experienced in the grain or stock business. 

The sharper having perfected his scheme of robbery 
and adopted a high-sounding and confidence-inspiring 
name, advertises freely in the metropolitan and country 
newspapers. He also procures (if he does not already 
possess it as the result of a prior and equally villainous 
scheme) what is known among this class of rascals as a 
" sucker list." That is, a list of persons w^ho have pre- 
viously been caught by similar schemes, or by reason of 
their opening correspondence with the operators of earlier 
schemes have indicated a desire to be caught. These lists 
are interchangeable or purchasable. A possible victim, 
having written to one of these " fakers," will be surprised 
at his rise from obscurity to popularity in the course of a 
few^ months, as indicated by his increased mail and the 
numerous offers of golden opportunities for acquiring a 
steady income or great wealth. 

The following document, sent out in March, 1903, by a 
Phiiadelphian, is a mild example of an announcement that 
a '' plan never before open to you," but which promises " a 



96 GOLD BRICKS OF SPECULATION 

large permanent income with absolute safety " is now open 
to those who will allow the kind gentleman to '' handle 
their account " : 

SPECIAL ANNOUNCEMENT. 

As the result of ni\ thirty-five years' experience as a professional 
trader in stocks listed upon the New York Stock Exchange I have 
evolved a plan, which, if rigidly adhered to, 1)rings large and regu- 
lar profits. It is the plan adopted by all successful professional 
traders and is the only way to make confiur.ous and large profits. 

It is in\' intention to widen the scope of my business and I now 
place before you an opportunity to speculate in the stock market 
through a regular stock exchange house, and on a plan never before 
open to you. This plan is the result of my thirty-five years' obser- 
vation and experience as a professional trader, and if you want a 
large permanent income with absolute safety for your investment 
then write me for full details, references, etc. 

Trusting to have the privilege of handling your account, I re- 
main Sincerely vours. 



It requires from three to a dozen letters before the vic- 
tim begins to give up his wealth. But ha\'ing once suc- 
cumbed to the blandishments of the accomplished swindler, 
it is appalling to note the confidence and sense of security 
he displays in absolute strangers while the deal is on, and 
the surprise he manifests when he finally and inevitably 
awakens to the realization that he has l)een duped and 
robbed. 

About ninety-nine per cent of the victims are ashamed 
to acknowledge their greenness and very few of the balance 
care to go to the trouble and vexations of prosecuting. 
As a result tJiis system of robbery is eoiuparatively safe. 

The object of every one of these swindles is to get 
possession of the victim's money and then either to decamp 
or ostensibly to lose it for him, but in either event to con- 
vert it to the use of the swdndler. There are as many 



'' GET-RICH'QUICK " SWINDLES 97 

methods of accomplishing- the latter result as there are 
schemes. Later 1 shall illustrate by the actual experiences 
of a few of the dupes these final moves on the swindlers' 
checkerboard. 

I find it unnecessary to draw on the imagination for 
illustrations of the gullibility of the victims of sharpers. 
So many living examples have been called to my attention 
that I have grown almost to despair of the efficacy of warn- 
ing those who absolutely insist on being buncoed. To 
caution either verbally or in writing those who have 
already sent their money to the sharper is almost invariably 
a waste of time and effort, for the " expert circular writer " 
has usually completed his fatal work in filling the mind 
of the victim with visions of '' enormous profits/' and com- 
mon sense arguments weigh as nothing against the faint- 
est possibility of a realization of those dreams, if once the 
victim acquires the " get-rich-quick " mania. 

No more heartless enterprise has been developed by 
the race for sudden wealth. It appeals with plausible 
promise and phrase (that alone serve, with the initiated, 
to stamp it as fraudulent) to the cupidity of the ignorant 
and the ambition of the unsophisticated. It sets a trap 
from which there is no avenue of escape for the victim 
who listens to its invitation. 

One of the most notable examples of an otherwise 
intelligent and prudent citizen becoming the victim of 
the idea that another man would take his money and make 
large profits for him in speculation, may be deduced from 
a Pennsylvanian's experience. While living in an interior 
town, the victim was a frequent visitor to the larger cities. 
He had, by economy and intelligent investments, accumu- 
lated a respectable competency; was weW advanced in 
years, and was a prominent and active citizen and church- 



98 GOLD BRICKS OF SPECULATION 

man, enjoying the confidence and respect of his neighbors. 
A near relation was an officer of a prominent banking- 
house, and among his friends and acquaintances were men 
of affairs in the larger cities of the State. 

Improbable as it may seem, this conservative gentle- 
man became interested in a "speculative pool" operated 
by a well-known character, having headquarters in a large 
Pennsylvania city. On his first remittance to the" pool " 
the dividends were liberal, and he re-invested them with 
additional sums. His neighbors hearing of his " hand- 
some profits " also " invested " freely in the " pool." His 
relatives and friends argued and protested in vain. In a 
few months he had a large amount of money " invested," 
and his neighbors had also become heavily involved. 

Finally a '' run " was started on the " pool " manager. 
Investors became anxious and were swarming to head- 
quarters to draw out their investments and profits. The 
friends of the " investor " telegraphed him concerning the 
situation, urging him to come to town and get his money 
out. Next morning he was on hand anxious to withdraw 
his funds from the '* pool," but when he reached the office 
of the manager he found it impossible to get inside, owing 
to the large number of " investors " who had arrived 
earlier and were awaiting their turn, while pohcemen 
guarded the entrance to the office. 

Disappointed and worried, the gentleman sought out 
an influential friend, one who had previously warned him 
against putting his money into this " pool," and who suc- 
ceeded in getting him into the office of the manager of the 
'' pool " through a rear window, which opened on to an 
adjacent roof. The friend returned to his office expecting 
that he would soon see the gentleman, with either his 
money or information that he could not get it ; but as even- 



''GET-RICH-QUICK" SWINDLES 99 

ing approached and nothing was heard or seen of him, 
the friend became anxious and visited the bank of which 
the gentleman's relative was an officer. He learned from 
the relative that he, likewise, had failed to hear from him. 
While standing at the office window discussing this pecu- 
liar circumstance, the gentleman was seen hurrying by. 
Tapping on the window, they attracted his attention and 
he came into the bank. 

Of course the first question was, '' Did you get your 
money? " 

The answer and explanation astounded both gentle- 
men, and clearly illustrates the condition of mind" of the 
average person who " invests " in a " get-rich-quick " 
scheme. 

" No, I didn't get the money, although I could have 

had it if I had wished to take it ; had the money 

piled up on his desk; but told me if I drew it out of 
the ' pool ' now, I could not put it back again and I left it 
in. I'm hurrying to the train now to go home." 

Next day the " pool " " busted." A week later the 
gentleman died. An investigation of his affairs developed 
the fact that the ''' pool " owed him $28,000. 

" O, what a goodly outside falsehood hath ! " 

To describe, with any regard for detail, the variety 
and methods of the infinite number of frauds successfully 
operated in the United States and which are commonly 
designated as '' get-rich-quick " schemes, would require 
more time than I can devote to the subject, and would 
overtax the capacity of this volume. Therefore I shall 
limit this article to a brief exposition of the nefarious 
methods adopted by promoters of such schemes as pretend 
to have the grain and stock markets as a basis of operation, 



100 GOLD BRICKS OF SPECULATION 

to " turf swindles " and to the selling of stocks of mining, 
oil and industrial corporations. 

The ingenuity displayed by the thieves who infest Chi- 
cago, New York, St. Louis, and other cities, in their efforts 
to part the fool from his money, is remarkable, and the 
success and variety of their schemes are tributes to their 
industry and knowledge of human nature. They incident- 
ally demonstrate that the old adage '* A sucker is born 
every minute," should be modernized to read " A sucker 
is born every second.'' 

Ever since 1882, when the " Fund W " swindle netted 
millions of dollars to the promoters, who were about the 
first to give promises of marvelous earnings in speculative 
ventures conducted for the joint account of a large numl^er 
of persons voluntarily contributing money to make up a 
pool, there has been a never-ending procession of similar 
projects of this general character. Not one of them has 
been entitled to the slightest degree of confidence. The 
promoters of them were, without exception, the most heart- 
less villains that ever rol3bed a servant girl of her hard- 
earned dollars or a war veteran, in a soldiers' home, of the 
mite he had saved out of his pension. 

There is no longer any novelty to the " get-rich-cjuick " 
schemes that are being launched with surprising regularity, 
and the swindlers seem to have about exhausted their 
vocabulary in coining new titles for their various enter- 
prises. 

Those that hold closest to the system adopted by the 
'' Fund W '' swindlers meet with the most remarkable suc- 
cess. The system is absolutely and imqaestionably to 
claim the ability to make '' big " money by trading in the 
stock, grain or cotton market by a secret and safe system, 
to allow the public to put up its money and share in these 



" GET-RICH-OUICK " SIVISDLES 101 

profits, and to pay the early investors enormous dividends, 
thereby making- walking advertisements of them so that 
they unwittingly induce their friends to invest. 

This system was closely adhered to by the two great 
swindles perpetrated under the names of '' The E. S. Dean 
Safe System of Speculation " in 1896-97 at New York, and 
the " Franklin Syndicate " in 1899 at Brooklyn. 

No better illustration of the '' get-rich-quick " mania 
can be shown than the histories of these two great 
swindles which I have prepared for the purpose of bring- 
ing home to the hearts and minds of the American people 
their remarkable gullibility and the impotency of the laws, 
or, to be accurate, the ineffectiveness of the manner in 
which the laws are enforced. For while in both the Dean 
and the Franklin Syndicate cases there were convictions, 
these convictions were exceptions and largely the result 
of popular sentiment. 



102 GOLD BRICKS Of SPECULATION 



CHAPTER 11. 

THE E. S. DEAN CO. SWINDLE. 

Showing the expert circular writer's mission ; the way money can 
be " lost " ; the convenient mercantile agency ; how the " faker " 
is subject to blackmail, and how the innocent insist on being 
fleeced. 

Probably the most remarkable " get-rich-qiiick " 
scheme ever perpetrated on the American public was that 
of '' The E. S. Dean Co." It was noteworthy for the nmn- 
ber of victims, the amount of money taken in, and the 
manner in which it was suddenly closed up. The con- 
cern, which had been funning for some months under the 
name of E. S. Dean & Co., was incorporated September 
30, 1896, under the laws of New Jersey, as The E. S. Dean 
Co., with an '' authorized capital " of $1,000,000, but with 
a paid up capital of $t 0,000, divided into 100 shares of 
$100 each. 

The incorporators were Myron L. Bernard, a former 
newspaper reporter, Jacob Landsberg and Leopold Bal- 
bach. Bernard was chosen president, J. B. Kellogg, man- 
ager, and Landsl)erg, secretary. Landsberg was a boy 
eighteen years old, who li\'ed in poor rooms at 20 East 
Houston street. The real head and front of The E. S. 
Dean Company was said to be Sam Keller, who was at one 
time a " banker and broker " in Sheffield, Alabama. He 
was also understood to have l)een back of the following con- 
cerns: J. B. Kellogg & Co., Sam Keller & Co., Talcott & 
Co., W. F. O'Connor & Co., and John De Wolf & Co. It 
has always been a question whether or not E. S. Dean 



THE E. S. DEAN CO. SWINDLE 103 

was a man, a woman, or a myth. No one ever seemed to 
be able to locate " him,'' '' her " or " it," and it is more 
than probable that no such person ever existed except in 
the minds of the swindlers who conceived and carried out 
the scheme. 

The Dean Company had branches in New York, To- 
ledo, Indianapolis, Detroit, Cincinnati, Louisville, Salt 
Lake City, Knoxville, Cleveland, Atlanta, Richmond, Day- 
ton, St. Louis, Columbus, Baltimore, Boston and Portland. 

The following, clipped from a metropolitan daily of 
October ii, 1896, are fair specimens of the character of 
the advertisements which appeared in almost every news- 
paper in the country: 

DONT DELAY. 

SPECULATE CONSERVATIVELY. 

$20 to $1,000 

INVESTED THROUGH US WILL YIELD YOU A 

HANDSOME INCOME. 

EXPLANATORY PAMPHLETS AND MARKET 

REVIEWS mailed free on application. Presidential campaign 

offers incomparable opportunities. 

We have NOT ONE dissatisfied customer. 

DeWOLF & CO, Bankers & Brokers, 

HIGHEST REFERENCES. 50 Broadway, N. Y. 



MAKE YOUR MONEY 
EARN MONEY. 
Under our systematic co-operative plan of speculation, '' You Avoid 
Risks." Settlements made once a week. Sums of $20 to $1,000 
invested under our plan will vield satisfactory returns. PROS- 
PECTUS EXPLAINING OUR METHODS MAILED FREE. 

SAM KELLER & CO. 

44 Broadway. New York. 

Bank reference. Agents wanted in every city. 



104 GOLD BRICKS OF SPECULATION 

BIG PROFITS 

from small investments through the E. S. Dean Co.'s System of 
Operation. An enormous 

WHEAT SYNDICATE 
forming. Write for particulars. 

THE E. S. DEAN CO., 

35 Broadway, New York. 



These schemes, with several others, were operated at 
the same time by a coterie of shrewd swindlers composed 
of Sam Keller, J. B. Kellogg, Myron L. Bernard, Gerald 
M. Eberman, Alfred R. Goslin, Charles Wienman and sev- 
eral " dmiimies." 

Kellogg was an expert circular writer and his produc- 
tions seemed to reach the pockets of all classes. At this 
late day I cannot refrain from producing several of his 
choicest " literary efforts," which were printed and mailed 
to hundreds of thousands of persons. 

The following, printed in two colors and freely under- 
scored, was one of the earliest : 

STOP AT NOTHING 
TO GET AT THE FACTS. 

If you can draw, every second week in the year, cash amounting 
to 300 to 400 per cent annually on your investment, without in- 
curring the risk that you do in ordinary husiness, you are interested 
aren't you? 

THAT'S WHAT YOU ARE WORKING FOR! 
To make money. Now, start at once ; and don't stop until you 
are satisfied that what we say is true. We have convinced the most 
able financiers and the banking and brokerage fraternity of this 
country, that 

THE E. S. DEAN SYSTEM OF SPECULATION 
is the most desirable method of gaining rapid wealth in existence. 
It took us years to convince some, hut to-day there is not a person 
living can deny the facts. Our record is open. We court investi- 



THE E. S. DEAN CO. SWINDLE 105 

gation. We have thousands of testimonials, references, indorsers, 
advocates, banks, trusts and syndicates, customers in nearly every 
state in the Union ready and willing to vouch for us in the highest 
terms. Map out your line of investigation ; drop us a postal card, 
and you will not regret in a few years that you awoke to the times 
and the progression of speculation. And as far as taking any risk, 
we ask you : 
ARE YOU TAKING ANY RISKS NOW? 

ARE YOUR PROFITS 300 TO 400 % YEARLY? 

DO YOUR PROFITS APPEAR IN COLD CASH OR 
IN ACCUMULATION IN STOCK? 
DO YOU KNOW ANYTHING ABOUT WALL STREET? 
DO YOU KNOW THE PRICES OF STOCK MAKE AND 

LOSE FORTUNES FOR TRADERS EVERY DAY? 
DO YOU KNOW THE PRICE OF A STOCK CAN BE MADE 

TO GO UP OR DOWN BY ENOUGH MONEY? 
DO YOU KNOW WE HAVE THE MONEY AND GETTING 

STRONGER EVERY YEAR? 

DO YOU DOUBT THE PRINCIPLE OF CO-OPERATION 

TO INFLUENCE STOCKS? 

DO YOU HAVE ANY DESIRE TO BE CONVINCED? 

THEN INVESTIGATE THE 

DEAN SAFE SYSTEM. 

E. S. DEAN & COMPANY, 

Bankers and Brokers, 35 Broadway, New York. 



The next is the printed matter only, in the body of a 
four-page circular elaborately printed and containing views 
of the various offices of The E. S. Dean Co. : 

300 TO 400 PER CENT YEARLY PAID IN CASH TO YOU 
EVERY TWO WEEKS. 
Be Flonest ! Reason with Yourself ! 

How can you make money honestly — without risk? Do you 
know that $1,000 placed through the Dean Safe System of Specula- 
tion a year ago would be over $4,000 to-day? The average profits 
on it would be sent to you in cash every two weeks — $125 semi- 
monthly is a good income on every $1,000. Think of $10 a day — is 
what your money would earn — are you making that clear each 
week-dav with vour brains? 



106 GOLD BRICKS OF SPECULATION 

GETTING RICH. 

For years people have been quietly getting rich through us. We 
can point out the persons in nearly every town in the United States. 

RISK. 

Are you taking any risk now in order to get rich? Where is 
your money ? Have you $25 ? Even that in a few years would net 
you thousands if allowed to compound. Is your money in mer- 
chandise? If so, you are working hard to sell it, and taking great 
chances of loss from fire, bad debts, bad business, shrinkage in 
values, and many other ways, and with all these chances of loss 
that you assume will your profits average 400 per cent per" annum? 
Have you money in bonds? If so, are they such that they cannot 
depreciate in value? If they are they must be a new kind, as any 
student of Political Economy will tell you that even United States 
Government Bonds are not absolutely safe. " This Government can 
fail." " It is not impossible." Have you any money in Mortgages? 
If so, you are well aware that millions of dollars are lost annually 
in mortgages, and you must expect to meet your share of loss sooner 
or later, but should you be so fortunate as to never meet with a 
loss, you will only have six per cent income on your investment — • 
less than two weeks* profit — paid every second week by us since the 
starting of the Dean Safe Svstem. E. S. Dean said six years ago 
in our first advertisement \ " NO PERSON SHALL LOSE 
THEIR MONEY THROUGH ME." And that saying still 
stands good. 

Have you your money invested in Building and Loan Associa- 
tion or Insurance Companies? If so, you know too well the. risk 
you run, and the small profit you realize for the use of your money. 
We don't say that your money is not earning fortunes every year. 
But are you getting it in cash every two weeks, or once a year, for 
that matter? Do you get it at all? You may get five per cent as 
long as the Company exists. Bear in mind, The E. S. Dean Co. 
is incorporated, capital v$i, 000,000, fully paid. 

Have you money in Savings Banks? How much do you get on 
your investment with them and when do you get it? Have they 
got a Capital of $ 1,000,000, and suppose the Bank your money is 
in, closes its doors, as hundreds of Savings Banks do every year, 
where would you be? Do you know the officers of the Bank per- 
sonally? Do you know how your money is placed? Have you 
anv doubt about the E. S. Dean Company? Do you know the 
officers personally ? You can learn for two cents, and know how 



THE E. S. DEAN CO. SJVIXDEE 107 

and in what your money is invested. Can you realize that if worst 
should come to worst that The E. S. Dean Company, who operate 
The D^an Safe System wholly upon scientific principles, and which 
system has stood the tests of time and panics, should ever close its 
doors upon its thousands of customers, it would have to do so very 
quickly after you sent them your money or you would have it, and 
much more, drawn out and enjoying a home it paid for. So, if you 
fear loss, take one calm half-hour and reason with yourself. Let 
common sense and absolute facts predominate in your mind. We 
have paid cash dividends every second week for six years. Not a 
man, woman or child has ever placed money in our Special-Order 
Department but has received dividends punctually. We accept as 
low as $25 to open an account. Do you think that if you send us 
$25, or in other words, place $25 under the guidance of the Dean 
Safe System, and get your check for three or four dollars on the 
first and fifteenth of each month, that you are taking chances as 
compared with any other investment in existence? Ask yourself. 
WHAT ! Do you doubt anything ? Do you want proof, undis- 
putable? We will supply you with a list of 1,400 names. You 
can write to one or all. Do you want Banks? We will supply you 
the names of many who will vouch for us. Do you want to know 
who we are ? We will prove that all trades are executed on the 
New York Stock Exchange, the most reliable institution in the 
United States. Want some further proof that the Dean Safe 
System has paid, will pay, and does pay 300 to 400 per cent per 
annum ? If so, when E. S. Dean & Co. started to operate the Dean 
Safe System six years ago, no one believed that a system had been 
discovered by which absolute protection to the principal could be 
insured, with the exception of E. S. Dean. Time passed. Cour- 
ageous investors came timidly forward. Deposits average from $50 
to $1,000. Each one seemed to expect that each dividend would be 
the last, and even three years ago we had but few customers who 
would risk over $10 or $20 with us. But Time did its work nobly. 
Wisdom came with years, and customers who were timid at first 
became bold advocates of the Dean Safe System. Rich men began 
to investigate. Capitalists and large financial institutions came for- 
ward with their experts ; our books, records and transactions stood 
the test ; money poured in upon us ; more Combinations were 
started in our Special-Order Department, each one manipulated 
independently, but all under the one method. The Dean Safe 
System dividends were earned and paid every two weeks, and from 
4 to 118 per cent went to pur customers. 



108 GOLD BRICKS OF SPECULATION 

POWERFUL Capitalists came forward. Every inducement 
was offered to E. S. Dean & Co. but behind all the flattering induce- 
ments lurked the shadow of a gigantic Trust, and not until brains, 
money, influence, power and many advantageous conditions came 
forward and combined, and were ready to submit to all the rules 
laid down by E. S. Dean, w^as any proposition considered. That, 
like all else which we have always demanded for the use of our 
clients' money, came in time and The E. S. Dean Co. was incor- 
porated with $1,000,000 Capital, together with unlimited influence 
and facilities. It is they, who are asking you now to be honest 
with yourself. Believe us or investigate us. Remember, anyone 
w^ho says anything to our detriment is ignorant, knows nothing of 
what they say, and we can prove every assertion herein made, by our 
Sixth Annual Statement (beautiful book) sent upon application. 
Read, consider and write to 

THE E. S. DEAN CO., BROKERS, 

35 BROADWAY, NEW YORK. 

The following was the last circular printed and is sig- 
nificantly headed : — 

THE MOST IMPORTANT NOTICE EVER SENT TO THE 

CUSTOMERS AND FRIENDS OF THE E. S. 

DEAN COMPANY. 

We are compelled, through circumstances which seem impossible 
for us to obliterate, to lay before you a matter which has seriously 
affected our calculations ; and as business such as ours can only be 
conducted when the most systematic principles are followed, we 
consider it our duty to make an open confession, although we do so 
reluctantly and with some feeling of shame. What we have to 
impart is this : 

For years we have been unable to govern the amount of money 
remitted to us at the eleventh hour to be placed in our Special Com- 
binations. It is very unsatisfactory to a customer to return his 
prospective investment to him, while this client may have had a 
relative or friend who was in time to participate and reap the 
benefits of liis or her promptness. If money is sent for a Special 
Combination, we certainly cannot, without the proper authority, 
invest it in our Special-Order Department ; and loss of time is 
followed by loss of temper and money. 

Our Special Combination No. 12 (Sugar) was outlined and the 



THE E. S. DEAN CO. SWINDLE 109 

percentages figured on a capital of v$25o,ooo. As that Industrial is 
controlled by the Sugar Trust, and trading on too gigantic scale 
in that commodity might excite opposition and seriously interfere 
with our plans and profits, we specified that $250,000 would be the 
maximum amount received. The result is that almost double that 
amount was sent to us, and by request all above the amount of the 
surplus capital of the Combination was placed in our Special Order 
Department and two-thirds at the closing date. Thus swelling the 
various Combinations of that Department to such an extent that we 
are in possession of sufficient capital in our Special Order Depart- 
ment now to manipulate successfully, we believe, almost any deal in 
any stock or commodity that we should decide upon. 

From the present outlook there seems to be no doubt but that 
the wheat market opens up an opportunity for us to again demon- 
strate to our customers what we have clearly shown in the past — • 
that when we concentrate our forces, capital and energies, towards a 
certain point, large profits are quickly made 

The war rumor will afifect the market whether the battlefields 
are crossed or not. In either the event of peace or war, the price 
of wheat fluctuates wildly, and we are in a position to know just 
what stand to take. We have now hundreds of thousands of dollars 
in our hands ; and that governed and controlled by the Dean Safe 
System, which never yet lost a dollar for any of its clients, means 
large profits, in our opinion. 

We are now in wheat, but we have always been partial to that 
commodity, and we are going into it still further. 

Such an opportunity has never before presented itself. To abso- 
lutely control the force and the important factors of the wheat, here 
and on the Chicago Board, it is necessary for us to hold the key of 
the situation ; and before many days our entire Special Order De- 
partment, which has been of sufficient powder to handle continually 
for years a number of the most active railroad stocks, which paid 
a profit (in cash) every fifteen days to our large clientele, will go 
into wheat. 

Each Combination in that Department will add its entire capital 
to trading in grain, and to utilize the surplus money sent in to us 
for the Sugar Combination, and to meet many demands of pros- 
pective customers, w^e w^ill at once begin the formation of a Special 
No. 2 Wheat Combination, with a capital of $500,000, or more. 

As we just closed, on March ist, our last Combination with a 
handsome profit, our brokers, who are thoroughly posted in grain, 
are ready to take charge of the new Combination. It will run for 



110 GOLD BRICKS OF SPECULATION 

thirty days, and at the end of that time we will not be surprised if 
our profits will be sufficient to hand you two dollars for every dollar 
you invest, if not initcli more. 

We are in the midst of war scares and foreign complications. 

With the new administration in power, prosperous times will 
prevail. ' "' ^*^ 

Our Special-Order Department will undoubtedly force heavy 
trading in wheat. 

The Special No. 2 Wheat Combination has every advantage in 
its favor. 

The Dean Safe System stands on its record. 

We shall accept from $50 up in this Special, and there is no 
limit to its capital. You will not be shut out, as in the Sugar Com- 
binations. We shall not attempt any corner, as where the Dean 
Safe System is applied, it is not necessary ; and all money on hand 
from now on outside the Sugar Combination will be placed in wheat. 
Watch it, whether you invest or not. We want the public to see 
what a powerful factor is the E. S. Dean Company when it goes 
into any one stock or commodity. 

Remember this company is the largest incorporated institution 
of its kind in America; and after May ist, will issue its seventh 
annual statement, containing more valuable hints, statistics and cash 
balances of the most complete and thoroughly tested system of 
scientific speculation ever known. It will have illustrations of new 
offices which we expect to occupy on or about May ist. It will be 
a most interesting and a thoroughly convincing financial work, 
showing how a combined capital, judiciously handled, can certainly 
make vast fortunes, as it has for many of our customers in any and 
all markets. 

We trust we will receive a portion of your patronage, and that 
you will certainly take advantage of this great opportunity, which, 
we want you to understand, is a most extraordinary chance, and 
which, no doubt, you know as well as we, that these opportunities 
seldom make their appearance. Send your money direct here on or 
before March 27th, or apply to any of our agents in the follow- 
ing towns : 

[Here follows a list of eighteen agents.] 

This Combination begins its operations March 27th, and dis- 
solves on April 27th. 

Thanking you for past favors, and hoping for a continuance of 
same, we are. Yours verv respectfully, 

THE'e. S. dean COMPANY. 



THE E. S. DEAN CO. SWINDLE 111 

P. S. — Our Special Wheat Combination No. ii shows a very 
handsome profit, and we have every reason to believe it will be very 
materially increased before its dissolution on April 3. 

According to Sam Keller's testimony, when the Dean 
swindlers were put on trial, all of the circulars were 
" birds " and they were worded so that " no one would 
fall to them as not being straight, but anyone would fall 
to them by sending along cash." 

The Dean Booklet is a " dream," as a few extracts 
from it will prove. 

The cover bears the following sentiments : 

" Do not Destrov This. Tt is Someone's Monthly Salary." 

"MAKE YOUR MONEY EARN YOU A SALARY. 
MONEY IS STRONGER THAN YOU ARE AND ONCE 
LAUNCHED IN THE RIGHT CHANNEL LABORS DAY 
AND NIGHT." 

" PUT $50 OR $100 TO WORK AT ONCE." 

" Money is a Good Soldier. Put it to work." 

'*.How simple the key to mystery when once it has been re- 
vealed." " How easy great things are when once they have been 
accomplished." 

" There is a tide in the AFFAIRS OF MEN whidi taken at the 
flood leads on to fortune." 

" Surely use alone makes money not a contemptible stone." 

" There is an hour in each man's life appointed to make his for- 
tune if then he seizes it." 

A few selections from the inside of the book may af- 
ford interest: 

" Do you wish to increase your income without personal atten- 
tion or annoyance? 

" Then use common sense. How do you suppose that Bankers 
can get so w^ealthy? 

'' How do you suppose Insurance Companies make millions ? 

" How do you suppose Savings Institutions accumulate gigantic 
fortunes ? 

" How do many men live as well on a capital of $3,000 as others 
can on a capital of $50,000? 



112 GOLD BRICKS OF SPECULATION 

"It is simply tliis : 

" They hire, procure or obtain your money in small amounts, at 
from 3^ to 6 per cent, per annum, and use it combined to make 
from 200 to 400 per cent, per annum." 

" OUR plan of operating is the one by which all successful 
speculators have made their fortunes, and if followed will result 
profitably to an\one." 

" There are to-day in this country thousands of men who are 
by a systematic method of speculating enjoying annual incomes 
ranging from $1,000 to $100,000, according to the amount they 
have invested." 

" Such handsome incomes are more often made by traders who 
are several hundred miles from the scene of operation and who act 
entirely upon the advice of their broker, than by those who by being 
on the field try to act as their own advisers." 

" By our plan the whole amount of money sent to us is never 
invested at one time and the trader is protected, no matter whether 
prices go UP OR DOWN." 

" THE DEAN SAFE SYSTEM, so called after E. S. Dean, 
the originator of the percentage table, who figured on the entire 
capital of a Combination, shows the proportion that can be safely 
invested as a margin in trading in stocks, so that should the market 
go against our judgment, we can, with the balance of the Com- 
bination's capital take advantage of the fluctuations which arc sure 
to come and "thus save our original margin." 

" IT IS FAMOUS for the simple reason that it has been con- 
demned by loud-mouthed people, of which we find plenty who are 
ever ready to discredit everything and anything on general princi- 
ples. It has been watched, tested, examined and argued over and 
over again, until it stands out to-day faultless and acknowledged by 
the shrewdest financiers, as the greatest money making enterprise 
known." 

WHY WE CALL IT SAFE. 

*' Because speculation under the rules of the Dean Safe System 
is devoid of all such risks as surround every other mode of Invest- 
ment. You get your cash every second week ; your profits arc so 
enormous that your original capital is soon in your pocket; you 
are enjoying the proceeds as you would a permanent salary, and 
are entirely free from loss from any direction whatsoever. Further- 
more, we assert it is safe. You may reason against your better 
judgment that loss will reach you before you draw out your original, 
and in that way console yourself for your lack of courage." 



THE E. S. DEAN CO. SWINDLE 113 

" It requires at least $50 worth of courage to venture into any 
enterprise — outside, perhaps, of a boot-blacking stand. If such is 
your conviction, allow us to state that anyone who has ever lost 
$1 through the Dean Safe System of Speculation since July i, 1890, 
up to the present writing, can draw upon us a sight draft, and we 
hereby bind ourselves to honor it." 

" Our aim and object is to some day be the strongest financial 
institution in the monc}- world. But at this writing, we acknowl- 
edge that we are far from it. It is more trouble to procure the 
patronage, confidence and clientage of the middle classes, who invest 
from $100 to $1,000 and to render them satisfactory service, than 
it is to build up a trade among the V^anderbilts, Rothschilds and 
Goulds, because they know what speculation is, and go in with un- 
flinching courage. They are aware that 300% or 400% is not a 
wonderfully large profit in Wall street. One of our combinations 
paid over 2000% from July i, 1895, to July i, 1896. The money 
was compounded. See table last page." 

'' x\nother reason is, that we have had to fight against a lot of 
unscrupulous brokers, bucketshop sharpers, gold-mine swindlers 
and real estate boomers, who have been preying upon the public, 
and at some time squeezed a few dollars out of the people, who 
would like to believe and realize in the Dean Safe System, but they 
recall the old adage ' A burnt child dreads the fire.' " 

Like all schemes to defraud, the Dean Company pro- 
vided blanks to accompany remittances. Below will be 
found a reproduction of the blank sent broadcast with the 
last and '' Most Important Notice " : 

SPECIAL WHEAT COMBINATION NO. 2. 

This Combination to dissolve on or before April 26, 1897. 



To the E. S. DEAN COMPANY 

35 Broadway, New York. 
Gentlemen : 

Herewith I beg to enclose you 

Dollars, to be used in speculation, which is left to your discretion 
both as to buying and selling of WHEAT for my account. 

My liability is STRICTLY LIMITED TO THE ABOVE 
AMOUNT, WHILE PROFITS ACCRUING TO ME ARE 
UNLIMITED. 



114 GOLD BRICKS OF SPECULATION 

I agree to allow you to deduct lo per cent from my profits as 
your remuneration. 

Name 

Address ( in full ) 



Dated 1897. 

N. B.— Cash, New York Drafts, liank Checks, P. (). Orders or 
Express Orders only received. 

(Across the end of the hlank was printed:) 

Acknowledged by indorsed 1w 

Credited by Filed by 

This combination was lost, as will appear later. 

While advertising to pay dividends every tv^'O weeks, 
every inducement was offered '' investors " to allow their 
" profits " to remain in the hands of The Dean Company 
and compound. 

A circular was mailed to investors as follows : 

TO ILLUSTRATE. 
The difference between drawing your dividends every two weeks 
or allowing them to remain and compound as taken from our Com- 
bination No. 221, for the three months ending April i, 1896: 
A^IOUNT $100 INVESTED. 

DIVIDJ-INDS DRAWN. 

Jan. 15, 1 1 % $ 9.90 

Feb. I, 9% 8.10 

Feb. 15,21% 1 8.90 

Mar. 1,31% 27.90 

Mar. 15, 21% 18.90 

Apl. 1 , 8% 7.20 

$90.90 
A^IOUNT $100 1N\'ESTED. 

D1\II)ENDS CO.Al POUNDED. 

Jan. 15,11% $ 9.90 

Feb. I, 9% 8.83 

Feb. 15, 21% 22.30 

Mar. I, 31% 39.34 

Mar. 15, 21% 34.03 

Apl. I, 8% 15.41 

$129.81 



THE E. S. DEAN CO. SWINDLE 115 

The above shows the amount you would gain, $38.91. if you 
allowed your money to compound according to the three months in 
Combination 221, from Jan. ist to April ist, 1896. The example 
is for a period of only three months and as the difiference grows 
proportionately larger, compounding continually, those who allow 
their dividends to compound for a year reap very large gains. 

About April 2, 1897, the managers of the Dean con- 
cern decided that the apphcations for a return of money 
invested were becoming so frequent that it would become 
necessary to apply to the courts for a receiver. A man 
with whom the company had done a very large business 
outside of their " safe system " was in Chicago, and he was 
telegraphed to come to New York at once, and Avarned not 
to arrive later than Saturday, so that he might act as a 
receiver for the concern. He was detained a few^ hours 
and did not arrive in New York until Sunday morning. 
He was too late, for an honest appHcation for an attach- 
ment made by a Mr. Thompson of New York, on behalf 
of some friends of his in Massachusetts, had closed the 
Dean offices. On April 7, 1897, the postal authorities at 
Washington issued a fraud order against The E. S. Dean 
Co. On April 8, 1897, the president, Myron L. Bernard, 
through his attorneys, applied to Chancellor McGill, in 
Hudson County, New Jersey, for a temporary receiver of 
the assets of The E. S. Dean Company^, and secured the 
appointment of George Norris, a lawwer, of No. 170 Pacific 
avenue, Jersey City. 

A peculiar and interesting fact regarding the tempo- 
rary receiver appointed w^as that his office, in New Jersey, 
was located at the same address as that of Van Winkle & 
Co., discretionary pool brokers. 

On April 9, 1897, the postoffice authorities, as an out- 
growth of the Dean swindle, recommended that fraud 
orders be issued against the following concerns : 



116 GOLD BRICKS OF SPECULATION 

Leopold Balbach. 

De Wolf & Co. 

John DeWolf. 

G. M. Eberman. 

Alfred Goslin. 

Sam Keller, 35 Broadway. 

Sam Keller, 44 and 50 Broadway. 

Jacob Lemberg. 

W. F. O'Connor. 

W. F. O'Connor & Co. 

C. F. Van Winkle. 

The E. S. Dean Company had 25,000 names on its 
" sucker " Hsts and was reported to be doing a business of 
$25,000 a day, and their HabiHties were estimated at $5,- 
000,000. 

The following statement of a woman customer will 
serve to illustrate the havoc which these schemes worked : 

I have a little farm in Newmarket, N. J., and was persuaded 
by the enthusiasm of my friends to put all the money I could raise 
into this investment. For this purpose I mortgaged my farm, and 
now I am absolutely penniless, with four children to support. 
There are dozens of others in my neighborhood who did as I did 
and who suffered in the same way. 

Fully ten thousand persons are said to have been vic- 
tims of this swindle. The dividends were paid out of the 
money originally received from the victims, and if the 
managers of the concern thought the '' investor " had more 
ready money, they would send a large dividend very soon 
after receiving the money from the '' lamb," as bait to in- 
duce him to increase his investment. The second remit- 
tance, however, w^as very seldom heard from, and investors 
called again and again for their money without getting 
any return. When the managers of the concern departed 



THE E. S. DEAN CO. SWINDLE 117 

they left only an open safe and some office furniture. The 
E. S. Dean Company operated independently, but was also 
closely allied to the otlier concerns mentioned. It gave 
to itself a semblance of financial standing by using the 
names of such well-known firms as Theodore W. Meyers & 
Co. and A. J. Weil & Co., as its brokers. 

Charles Neukirch, a member of the New York Stock 
Exchange and also a member of the firm of Theodore W. 
Meyers & Co., was expelled from the New York Stock 
Exchange on April 29th, 1897, as a result of the Dean 
expose. His part in the scheme was to furnish the Dean 
people memoranda which they could show to their cus- 
tomers in order to lead them to believe that The E. S. 
Dean Co. was carrying on gigantic deals in the New York 
Stock market, when, in fact, the promoters were putting- 
all the money they received, with the exception of that 
paid out as dividends, into their pockets. 

Sam Keller, who was the head of the concern and the 
most active man connected with it, also ran a similar con- 
cern in his own name. His office w^as managed by Alfred 
Goslin, who had been indicted in the fall of 1896 as the 
result of his operations in a mining stock known as " Bed- 
ford Consolidated." 

Six months after their indictment by the Federal grand 
jury, in June, 1897, these '' fakers " were back at their old 
business. The only change was that of the name. The 
firms in the second venture were the following : E. S. Mc- 
Millen & Co., Stuart & Paddock, George Hegelweide and 
T. E. Ward & Co. Alfred R. Goslin was the head of E. S. 
McMillen & Co.; Gerald M. Eberman was the head of 
George Hegelweide & Co. ; and J. B. Kellogg was at the 
head of the firm of Stuart & Paddock. The business of 
the above concerns was conducted in identically the same 



118 GOLD BRICKS OF SPECULATION 

manner as that of the old Dean Company, and the swindlers 
flooded the country with their literature. 

On March 12, 1900, the E. S. Dean people were put 
on trial. Sam Keller turned State's evidence, his testi- 
mony shedding nuich light on the manner in w^iich The 
E. S. Dean Company was formed, and how it obtained 
money from its dupes. He stated that Kellogg, Keller 
and Charles Weinman decided to incorporate the E. S. 
Dean Company with a nominal capital of $1,000,000, which 
was done, although they had difficulty in raising enough 
money to pay the cost of incorporating in New Jersey. 
Business was brisk, however, and soon Kellogg received 
$10,000 in profits, and there were $30,000 in profits in the 
treasury for division among the three partners. Money 
was coming in " like a snowball rolling down hill." 

The following is what Mr. Olcott, the District Attor- 
ney, had to say at the trial regarding Kellogg: 

'' He is the main robber. He is the principal thief. The other 
members of the concerns were merely his tools. They obeyed his 
orders. He was E. S. Dean & Company, and his methods were 
simple. He was an expert circular writer. There is no clearer or 
better circular writer in the country. His circulars were cleverly 
worded. They duped the poor people in the West and South and 
these people sent their money to E. S. Dean & Company. Kello,s:g 
kept the money and to the first he sent back big dividends — divi- 
dends of 50 per cent, per week. 

"Dividends were paid every two weeks and investors were told 
that they would get from 4 to 118 per cent, hi March they organ- 
ized a wheat pool, which they called Wheat Pool No. 2. They 
collected $149,000. ^^'heat went down, and they * failed ', excus- 
ing themselves by exhibiting a slip which showed a record of the 
purchase of wheat. The failure precipitated the investigation which 
led to the indictment of these men." 

Keller told his story substantially as outlined by Mr. 
Olcott : 



THE E. S. DEAN CO. SWINDLE 119 

'* Did you or any members of the concern ever beat the stock 
market, or ever try to beat it, during the time you were associated 
with Kellogg ? " asked Mr. Olcott. 

" I have tried to beat the stock market for twelve years," said 
the witness, " but I never was able to do it for a minute." 

On May 20, 1901, James B. Kellogg and Myron L. 
Bernard were convicted l)y a jury in the criminal branch 
of the United States Circuit Court, in New York, on the 
charge of using the mails for fraudulent purposes, and 
were brought up before Judge Thomas for sentence on the 
2 1 St. Kellogg was sentenced to a full term of eighteen 
months' imprisonment, and also to pay a fine of $500. In 
the case of Bernard a sentence of eighteen months was im- 
posed and the nominal fine of $1 was added. Bernard was 
forwarded at once to Sing* Sing. Kellogg was under sen- 
tence of seven and a half years in the State Court, and 
was then out on bail pending an appeal from that convic- 
tion. 

The Way Money Can Be " Lost." 

The writer personally made considerable investigation 
of the methods of the Dean swindlers both before and after 
the failure. Many peculiar and novel schemes were re- 
sorted to, but lack of space prevents my giving details of 
them all. That they should adopt the desperate expedient 
of losing a large sum of money seems ridiculous, and yet 
that is what they tried .to do. In a way, however, that 
really would have resulted in only a small loss; for while 
they would be able to exhibit statements of deals that would 
absorb all the funds of a '' combination," other statements 
— not shown — would show almost as much profit to the 
swindlers. 

By buying a million bushels of wheat and selling a 
million bushels of wheat at the same time they hoped to 



120 GOLD BRICKS OF SPECULATION 

have the market change so as to lose enough on either the 
purchase or the sale to absorb the funds of the '' combma- 
tion," while on the opposite trade they personally would 
make as much (less commissions) as the ''combination" 
lost. 

I had personal knowledge of one lot of a million bushels 
of wheat bought and sold on the Chicago market in this 
way — just prior to the failure. If wheat had gone up, 
the '' combination " would have had the sale, as that would 
have lost money; if it had gone down, the purchase would 
have been for the " combination " for the same reason, 
while in either case the transaction making the money 
would have been appropriated by the gang. 

Thus they could lose all the funds in the '' combina- 
tion " and show statements for the loss to their dupes, 
while they privately made on the opposite transaction al- 
most an equal amount which would go into their pockets. 

This is a very simple way of '' losing " money for the 
" lambs." 

In the case which I had personal knowledge of the 
failure precipitated the closing of the deals before there 
was an opportunity to transfer the funds in the manner 
contemplated. 

The Convenient Mercantile Ac;ency. 

Directly after the " failure " of the Dean Company, 
it was announced in the news items of a numl)er of New 
York papers that the " Bankers' and Merchants' Guar- 
antee Interchange " had decided to become the champion 
of the unfortunates who had invested their money in the 
scheme. The following will serve to illustrate why this 
concern took such a kindly interest in the affairs of the 
victims : 



THE E. S. DEAN CO. SJVINDEE 121 

■ According to the letter head of the Bankers' and Mer- 
chants' Credit Guarantee Interchange, J. Hotchkiss Evans 
was president, F. G. Gardner, treasurer, and Rohert J. 
Knox, secretary and counsel. Its letter head also stated 
that it had a capital of $50,000 and ^vas incorporated under 
the laws of the State of New York. The latest letter head 
of the company stated that it had a capital of $100,000, 
and that while Mr. Evans was manager. Dr. Neil L. Smith 
was the general counsel. 

Many persons had remarked that when induced by the 
newspaper '' ads " to write to The E. S. Dean Co. or to any 
of its affiliated concerns, the literature and circulars sent 
them in reply were supplemented within a few^ days by a 
letter from the Bankers' and Merchants' Credit Guarantee 
Company assuring them of their ability to act in the 
examination of all Wall street affairs, and in which they 
further said : 

" Our mission is to crush out all unprincipled concerns and 
direct the public to reliable firms. To mature this purpose we 
employ men of sterling integrity who are virtually detectives. They 
personall}' investigate the affairs of firms in any kind of business 
for parties asking us for reports on such firms. If we report a 
firm as reputable and operating squarely it is a guarantee to any 
investor with such firm that they are not on the point of failing, 
that they have capital and are dealing through the exchanges just 
as all members deal. We have a list of the members of the ex- 
changes here. We are also in touch with exchanges throughout 
the world. If you want to protect yourself against loss by fraud, 
failure and otherwise, it will pay you to invest two dollars with us 
and get a report on brokers, merchants and manufacturers." 

One of the prospective victims of The E. S. Dean Com- 
pany sent the following letter to the concern on February 
5. 1897: 

'' Gentlemen : Enclosed find two dollars, for which send me a 
list of reliable brokers who will handle a sum of monev to the best 



122 GOLD BRICKS OF SPECULATION 

advantage. I had placed several hundred dollars with some Chicago 
houses, and my letters have been returned marked 'fraudulent'. 
There are several good opportunities offered by New York houses 
if they are reliable, which might pay handsome on $500. Reply 
at once." 

In answer to the above letter the Bankers' and Mer- 
chants' Interchange sent over the signature of its presi- 
dent, the following: 

New York. 2/7/1897. 



Dear Sir : 

If you want to speculate we would refer you to E. S. Dean & 
Co., 35 Broadway, W. F. O'Connor, 10 Wall street. If you want 
to make an investment write to J. R. Kellogg & Co., Bankers, T/) 
Broadway, w^ho have a registering system on the market which is 
said to be infallible. Their indorsements are of the highest. 

Respectfully, 
Bankers' and ^Merchants' Credit Guarantee Interchange, 

Per J. Hotchkiss Evans, Mgr. 

Soon after the failure of the Dean Company this 
" fake " mercantile agency sent out the following circular: 

Dear Sir : 

Are your affairs with your broker in a satisfactory condition ? 
If not notify us by wire to protect your interests at once, as we 
make a specialty of investigating the affairs and methods of brokers. 
We can secure for you more than any firm of attorneys in New 
York. Telegraph or wire us to close your deals ; we will act imme- 
diately. The market is panicky. Act on this advice now. Secure 
special reports on standing and reliability of brokers, $2 each. 
Yours respectfully, 

J Hotchkiss Evans, President. 

How THE '' Faker '' is Subject to Blackmail. 

On September 2y, 1897, Sam Keller made charges of 
extortion against Robert A. Amnion and William Sweet- 
zer, law partners at Xo. 40 Exchange place, and AVilliam 



THE E. S. DEAN CO. SWINDLE 123 

J. Woods, a lawyer at No. 35 Broadway. These charges 
were made in the Centre Street PoHce Court. Keller al- 
leged that the persons named in his complaint had at- 
tempted to ohtain $30,000, afterward reducing the amount 
to $9,300, from him in his home, where three detectives, 
hidden in a rear room during the alleged attempt, had 
arrested the three lawyers. 

Keller had been indicted in the United States courts 
for using the mails for swindling purposes and was under 
bail awaiting trial on the charge. Threats of suits against 
him had been made by creditors. Amnion alleged that he 
represented creditors of Keller, and placed the claims in 
the hands of Woods for collection. Woods made repeated 
demands and, it also was alleged, made threats to induce 
Keller to pay it. 

Former Police Commissioner Murray and Abraham 
Levy, Keller's lawyers, advised him to lay the facts before 
the District Attorney. The District Attorney directed him 
to see Captain McClusky of the Detective Bureau for the 
purpose of arranging a trap for the men. W^arrants were 
sworn out, and Captain McClusky put Detective Sergeants 
Strip and Kelley and Roundsman Heffron on the case, 
directing them to mark ten one hundred dollar bills, to be 
used in obtaining evidence against the men. 

Keller wrote to Woods on Saturday to come to his 
home Monday evening at 8:30 o'clock. The detectives 
were concealed in a darkened rear parlor, the front parlor 
being brilliantly lighted. When Woods, A^mmon and 
Sweetzer arrived they were at once shown to the front 
parlor. According to the detectives. Woods opened the 
conversation by demanding $30,000 as the price of im- 
munity from criminal prosecution. Keller objected to pay- 
ing such a large sum, purposely extending the conversation 



124 GOLD BRICKS OF SPECULATION 

to give the detectiA^es an opportunity to obtain sufficient 
evidence to make a* thorough case. He finally agreed to 
pay $1,000 at once, $2,000 on October 15th and the balance 
in monthly installments of $1,000 each. A^^oods agreed 
to this proposition and Keller handed him ten one hundred- 
dollar bills which Woods careful 1}- counted and placed in 
his pocket. The detectives then emerged from their hiding- 
place and arrested W'^oods, Amnion and Sweetzer. Woods 
was searched and the marked bills were taken from his 
pocket. 

The prisoners indignantly declared the police had no 
right to interfere in Avhat they said w^as a matter of busi- 
ness between a lawyer and his client, but they were taken 
to police headquarters. 

The bail of each prisoner was fixed at $1,000. 

Keller read several letters in court written by W'oods 
to him and A. R. Goslin, who was in the Dean company. 
In one of these. Woods said criminal proceedings would 
be commenced against Keller l)y Amnion unless he made 
a settlement. Woods also acknowledged thq receipt of 
$250 sent by Keller, which it was alleged by Woods was a 
" counsel fee." Another letter threatened to bring so 
many suits against Keller that he would l)e unal^le to give 
bail. Woods said that he went to Keller's house for the 
purpose of settling the cases against him out of court, and 
that the money Keller might ha^'e paid would have been 
divided among the creditors. Sweetzer said he simply 
went to the house as a friend of Woods and Amnion, while 
Amnion declared he wen: there as Woods' client. 

How TTiE Innocent Inslst on Being Fleeced. 

During the early months of 1897 a '' fake " Protective 
Bureau, established in New^ ^^ork City by a broken-down 



THE E. S. DEAN CO. SWINDLE 125 

bucketshop man, was sending out unfavoral^le reports on 
the E. S. Dean Company, De Wolf & Company and other 
discretionary brokers, in the interest of another scheme 
ec[ually as villainous. Having reported on an inquiry from 
a New Hampshire postmaster that De Wolf & Company 
was unreliable, etc., the following reply was received by 
the " bureau " from the postmaster: 

March 26, 1897. 
The Investors' Protective Bureau, 

New York City. 
GentlexMen : 

I am in receipt of your unfavorable report respecting the firm 
of De Wolf & Co., 50 Broadway, N. Y., and as the result of the 
same am led to inquire if you are satisfied that your information as 
given in said report is entirely reliable and well founded? I know, 
because I have seen the checks, that the lowest sum which De Wolf 
& Co. have paid out to investors in their monthly syndicates since 
last June was 16 per cent., and I enclose you newspaper mentions 
of this firm as well as other matter. 

John Finck, real estate and insurance, 906 Third avenue, corner 
55th street, writes me as follows : '' I can cheerfully state that in 
all personal dealings with De Wolf & Co. I have at all times found 
them reliable and trustworthy, ever watchful and considerate of 
my interests. Their business reputation is of the best, and their 
standing and ability unquestioned." 

Francis B. Robert, real estate and loans, member of real estate 
exchange, 150 Broadway, writes: "I consider De Wolf & Co. a 
thoroughly reliable firm to do business with, and all my dealings 
through them have been perfectly satisfactory." 4 

B. Simpson, 93 Nassau St., writes : " I have known the firm of 
De Wolf & Co. for a very long time, and have done considerable 
business with them. All of my transactions with this firm have been 
perfectly satisfactory, and from personal experience I can speak of 
them in the highest terms, and would have no hesitancy in entrust- 
ing them with any amount of money at my command. They are 
reputed to be well fixed financially, and I have occasion to think 
their reputation well deserved. I have never yet heard their 
integrity questioned. They stand high, and I feel that I can recom- 
mend them most highly." 

I have other personal letters, written in response to my inquiries, 



126 GOLD BRICKS OF SPECULATIOX 

of the same tenor, and in view of this array of testimony will you 
not have the kindness to make for me a supplementary report? It 
is the truth that I desire to be possessed of. Enclose bill with your 
report and I will promptly remit payment. 
Very respectfully, 



Some of the following editorial comments on the E. S. 
Dean Company collapse are both interesting and instruc- 
tive : 

(From the Chicago Timcs-Hcrald, April lo, 1897.) 
SUCKERS AND BUCKETSHOPS. 

The gamblers have a maxim on which they base their calcula- 
tions for their daily bread, that a " sucker is born every minute," 
a " sucker " in their parlance being a gullible person who despite 
repeated warnings stands ready to give up his money to the first 
sharper he meets. In fact, the sharper does not always have to go 
to that much pains to get the " sucker's " money, as he is ready to 
deliver it on the first plausible opportunity. 

Of course, a " sucker " being born every minute, it is always 
harvest season for the sharpers, but we do not remember of so big 
a haul as that recently made by The E. S. Dean Company of New 
York, a bucketshop concern that has just conveniently failed, leaving 
a host of patrons to mourn their losses. 

The head and front of this concern, the matchless contriver of 
this colossal fraud, is said to be a woman, and if this is true she 
most assuredly '* hath the voice par excellence " in wooing in vic- 
tims. Other schemes are but mere patches to hers. Through 
plausibly worded advertisements, pointing out how easy it is to get 
rich, she attracted patronage from half the states, and when ready 
snapped the spring of the trap and got away with a million and a 
half of money. The only ambiguity about her advertisements was 
jj^fiat they did not explain who would get rich. She knew all 
-"the time. 

These tricks are played every year, but no one ever seems to 
profit by their exposure, A dozen years ago the great " Fund W " 
scheme in Chicago was brought to grief, but nobody knows how 
many fund schemes on the other letters of the alphabet had brought 
fortunes to their projectors. This was to be their final coup and it 
failed, but nobody sufifered much, except the victims. Truly the 
gamblers are right, for the crop of '' suckers " seems inexhaustible. 



THIl E. S. DIIAK CO. SWINDLE 12T 

A few weeks ago Mr. Hill of the Board of Trade exposed the 
modes of bucketshop keepers, but they might be exposed every day 
in the week and there would still be an abundance of flies to walk 
into the bucketshop parlor. The web is too beautiful and too 
attractive to be resisted. And the game looks so easy ! A man can 
sit down pencil in hand, with the statistics of the wheat or stock 
market before him, and figure up a fortune in less than no time. 
Let him try it in actual practice and his money vanishes as if it 
were fairy money. For while it is the maxim of the gambler that 
a sucker is born every minute, it is the maxim of the bucketshop 
man that the suckers' money, when paid in, is his, and under no 
circumstances to be paid out, except as bait. 

This is why the bucketshop man — or woman — can fail and yet 
grow rich. 



(From the American Elevator and Grain Trade, April 15, 1897.) 
The collapse of the E. S. Dean swindle seems to have put new 
life into the crusade against bucketshops. Fourteen of them were 
closed up in New York. Of course the branch swindles of the 
Dean Company, all over the country from Portland, Maine, to Salt 
Lake City, have gone out of business. The police in New York 
closed some of the shops, raiding them as they would any other 
gambling institution. John Hill, Jr., chairman of the Chicago Civic 
Federation, made a trip to Marshalltow^n, Iowa, and secured the 
indictment of parties running two bucketshops there. These, with 
a number of others in Iowa, are branches of two notorious Chicago 
*' Exchanges." The Chicago fight against the evil has reduced the 
number of bucketshops in Chicago from 100 to a dozen in the last 
year and a half, and all of them have been barred from the mails. 
And Chicago detectives were working on the Dean Company when 
the collapse came. 



(From The Trade Bulletin, Montreal, April 16, 1897.) 
THE GULLIBILITY OF SPECULATORS. 
The recent failure of E. S. Dean & Co., bucketshop proprietors 
of New York, who claimed to be an incorporated company with 
$1,000,000 capital, has forcibly illustrated the gullibility of some 
men, who in their insatiable desire to make money quickly, by the 
outlay of a small amount of capital, are induced to patronize the 
flimsiest of schemes, simply because they hold out inducements in 



128 GOLD BRICKS OF SPECULATION 

the shape of enormously big profits, which on their face are most 
improbable. For instance the Dean & Company bucketshop gam- 
blers would flood the United States and Canada with circulars, 
setting forth that their system of speculation was such a safe one 
that they promised their customers from 300 to 400 per cent, per 
annum on their outla}-. They professed to pool the contributions 
of their customers and divide the proceeds among them, which they 
stated was the only sure way to protect the interests of those who 
entrusted $100 and over to their new method of speculation, which 
was to earn 300 per cent, and over per annum. One would natur- 
ally suppose that such a preposterously wild offer would of itself 
defeat the object they had in view, namely, of fleecing the unwary. 
But the Dean men evidently had implicit faith in the adage that a 
" gull " IS born into the world every minute, and that notwithstand- 
ing the repeated exposure of fraud after fraud of this kind, they felt 
confident that as these '* gulls " became full-fledged a fair propor- 
tion of them would fall into their snare. It is estimated that no less 
than 26,000 separate sums from all parts of the United States and 
Canada were sent them in cash, equal to over $2,000,000; and now 
that this so-called safe method of speculative concern of $1,000,000 
capital has succumbed with all the big i)rofits assured to its specula- 
tive dupes, there are scared}- any assets in the estate wherewith to 
pay a dividend. All that Dean & Co. had to do was to open an 
office, send out catchy circulars holding out to the " gulls " a short 
and quick way of making immense profits, and in poured the $100 
remittances from far and near, in the expectation of getting returns 
of 300 to 400 per cent, for their money. It is inconceivable how 
people with any common sense can fall victims to such glaring 
frauds ; and yet strange as it may appear, there are other batches 
of credulous people ready to take the next bait offered, provided 
the promises of safe profit are outlandishly big enough to attract 
attention. There seems to be an irresistible fascination in the 
presentation of schemes which are said to promise incredible profits, 
and it would appear that the greater the mystery that surrounds 
the methods by which these improbable results are promised, the 
more likely they are to secure the confidence of the imwary, who 
part with their money in the belief that they will be the lucky 
recipients of the big gains held out to them. And as soon as these 
gambling frauds have made a sufficient haul and have closed their 
doors, they rely upon the belief that they are not going to be both- 
ered much with their creditors' claims, for the reason that the latter 
in most instances will rather pocket their losses, than risk becoming 



THE L. S. DEAN CO. SWINDLE 129 

the objects of ridicule for being. caught by such flagrant dupHcity. 
The E. S. Dean & Co. fiasco is a forcible illustration of the gulli- 
bility of a considerable portion of the mercantile community who 
are carried away by the most ludicrously fraudulent enterprises 
imaginable, so long as short and quick returns on a comparatively 
small investment are promised. This is the bait that inevitably 
lures, and quite a number of Canadians are said to have fallen 
victims thereto. E. S. Dean & Co. were bucketshop proprietors in 
the strictest sense of the term. "^^ * '^ 

How THE Swindler Avoids the Penitentiary if His 

Scheme Nets Him Sufficient Funds to 

Employ Eminent Counsel. 

The Dean " failure " occurred in April, 1897. In June 
of the same year the principals were indicted by the Federal 
grand jury. Indictments were also returned in the State 
courts, and after many delays and mistrials James B. Kel- 
logg and the president, Bernard, were convicted in the 
United States Court on May 20, 1901. The following day 
they were both sentenced to imprisonment for eighteen 
months. Kellogg had previously been convicted in the 
State courts and was also under sentence of seven and 
one-half years' imprisonment in that case. Kellogg ap- 
pealed and furnished $40,000 bail bond. 

At the present writing (March, 1903,) within a few 
days of being six years after the expose of the Dean swin- 
dle, there are indications that the appeal case will be 
argued. Kellogg has employed the most distinguished 
counsel, and it is evident that he is spending immense sums 
to escape the penitentiary. 



130 COLD BRICKS 01' SPECULATION 



CHAPTER III. 

HISTORY OF THE FRANKLIN SYNDICATE. 

Which demonstrates that the more ridiculous and unreasonable a 
scheme is, the larger the number of would-be investors it at- 
tracts ; that swindlers are in turn duped and robbed by their 
accessories ; and in which the question arises : "Is the ' sucker ' 
a product of the rural districts or of the great cities? " 

In Xovember, 1899, after a career of about eight 
months, the Frankhn Syndicate of Brooklyn, N. Y., 
" failed." The police raided the headquarters of the " Syn- 
dicate " at 144 Floyd street and arrested Louis Miller, a 
brother of the promoter, \\'illiam F. ]\Iiller, and secured 
about $8,500 in cash, which had l:)een taken in during the 
day and was found secreted under a sofa in the apartments 
of a Miss Gorley, of 142 Floyd street. She said that Wil- 
liam F. INIiller had told her to put it there. Miller had 
disappeared, and detectives who searched for him an- 
nounced that he was a fugitive from justice. 

For months the strange investment concern had pros- 
pered, it being beyond the power of the authorities to 
prove the fraud, which was apparent to all save the cus- 
tomers who were tempted and led on liy the promise of '' 10 
per cent per week to investors." 

Miller, the promoter of this dazzling enterprise, who 
was but twenty-three years of age, began the Franklin 
Syndicate in a small way, locating his ofhces among the 
poorer classes in Brooklyn. He made as a feature of his 
business the acceptance of small sums of money and the 
alleged investment of them for the poor people. He 
claimed that by inside tips on the stock market he was able 



HISTORY OF THE FRANKLIN SYNDICATE 131 

to reap large and quick profits, of which he was wilHng to 
pay a large percentage to his clients. He paid the interest 
on the principal each week, and his business increased. 
For some time he had been engaged in offering his glitter- 
ing inducements to the people to send their money to him 
to make use of, but it was only in the last few months of 
his scheme that, by extensive advertising, he had man- 
aged to attract daily to his office hundreds of people, who 
gathered in a long line or fought with each other for the 
opportunity to hand out their savings. 

No syndicate had ever attempted to pay such wonder- 
ful rates of interest (lo per cent per week) as the Frank- 
lin Syndicate. It is said that in the week preceding the raid 
Miller had received daily deposits aggregating from $30,- 
000 to $40,000. It is easy to see, under the circumstances, 
how^ he could pay out 10 per cent of this amount a week and 
still make money. 

The principle of the endless chain developed by Miller 
depended upon the fact that his old customers brought 
him additional members, and w^re allowed a commission of 
5 per cent upon all money thus invested. Those who were 
drawing this income of 5 per cent became walking adver- 
tisements for the Franklin Syndicate. 

The interest of 10 per cent a week, or 520 per cent a 
year, guaranteed by Miller, did not, in reality, begin to 
represent the obligations incurred by the head of the 
Franklin Syndicate. The rate of 520 per cent a year was 
estimated on a basis of simple interest only. Many of the 
patrons w^ere in the habit of re-investing the 10 per cent 
interest, or, in other words, '' pyramiding " their gains. 
One of the patrons who invested $100 and who re-invested 
the 10 per cent at the end of twenty-five weeks found him- 
self with a credit in the Franklin Syndicate of v$i,029, all 



132 GOLD BRICKS OF SPECULATION 

from the original investment of $ioo. Inasmuch as Miller 
refused to carry accounts of more than $i,ooo, this cus- 
tomer was compelled to re-invest in the names of other 
members of his family. At the time of Miller's arrest he 
said that he had more than $3,000 in the syndicate, all 
from the original investment of $100. 

An astonishing feature of the whole scheme was the 
stolid confidence reposed in Miller by his dupes to the last 
moment. All of the day following the raid, and until 9:30 
o'clock that night, the victims thronged Floyd .street, 
denouncing the court officials and proclaiming their faith 
in Miller. There w^as no run on the syndicate, even in 
the face of all the exposures. 

The books of the Franklin Syndicate showed that be- 
tween October 14th and November i6th Miller received 
$620,000, and from August ist to the time the syndicate 
was closed by the police (less than four months later) the 
receipts exceeded $2,000,000. Police Captain Lees said 
that he had found drafts in Miller's place which led him to 
believe that $3,400,000 had been collected by Miller from 
his dupes. On the basis of one-half the dividends re-in- 
vested, this w^ould indicate that Miller had kept and made 
away with about $1,700,000. 

Miller is reported as having said to a New York Even- 
ing World reporter that the syndicate was started on a 
capital of $50 and that at least $1,500,000 had passed 
through his hands while he was in the enterprise, and 
that the police made no attempt to prevent his escape. He 
was in the New York City Hall when Brooklyn detectives 
were supposed to h^ searching for him. 

Within the two weeks preceding tlie raid, it is said. 
Miller sent $45,000 to relatives in Germany, and a day or 



HISTORY OF Tim PRAXKLIX SYXDICATE 133 

two before he took $150,000 from the Wells-Fargo Com- 
pany's bank, where he had it on deposit. 

On November 2y, 1899, thirty-five writs of attachment 
against Wilham F. Miller and the Franklin Syndicate were 
signed by Justice Bookstaver, in the Supreme Court. 
These attachments were merely the forerunners of 1,000 
others. Within three days after the raid there were about 
1,200 letters at the Brooklyn Post Office addressed to the 
Franklin Syndicate. They were returned to the writers, 
the scheme having been declared fraudulent by the Fed- 
eral authorities. 

The New York Jounial of April 2, 1900, is authority 
for the statement that the man behind the Franklin Syndi- 
cate was William E. Delaney^ " king of swindlers," the 
man w^ho originated and engineered the '' Fund W " fraud 
in Chicago, the " Stock and Grain Exchange " in Pitts- 
burg, the " Dean Swindle " which was '' Fund W " over 
again in New York, and every other big discretionary pool 
game that has been worked on the Eastern public. De- 
laney's name had not been mentioned in anything published 
about the Miller Syndicate. Most of those who had worked 
with Miller never heard his name. He was the hidden 
power that " pulled the strings," and it was due to this 
fact that Delaney was at large and in the enjoyment of a 
fortune of perhaps a million dollars, not one dollar of 
which was acquired otherwise than by fraud. Only once 
was he in the toils. There were eighteen indictments in 
Pittsburg secured against him when his " Public Grain 
and Stock Exchange " " went up " five years before. 
These indictments are still in force, and the Pittsburg 
police have been looking for Delaney ever since. He is 
now in New York and has been there since the collapse of 
the Miller Syndicate. 



134 GOLD BRICKS OF SPECULATION 

Delaney's chief lieutenant nearly always has heen " Big 
Ed " Schlesinger, the same man who, when the Franklin 
Syndicate got too big for Miller's apprentice hand, stepped 
in and took charge of the bales of money that were sent in 
by the dupes to whom was promised 520 per cent indefi- 
nitely. The most startling of all was the fact that the police 
of Brooklyn knew that the Miller syndicate was one of the 
games of this king of swindlers, having been so advised by 
Detective McTighe of the Pittsburg police department a 
month before Miller's game was brought to an end. 

If Captain Reynolds, or Deputy Chief McKellar, to 
whom the communication was made, had acted at once 
there would have been saved to the investors in the Frank- 
lin Syndicate probably half a million dollars. Instead, they 
allowed the swindle to run on until the newspapers had 
forced them to action and Miller had l)een indicted. The 
alluring circulars, the letter heads, the method of book- 
keeping — everything about the business — was an exact 
du])licate of those seized by the Pittsburg police when they 
raided Delaney's " Public Stock and Grain Exchange " in 
1894. This Delaney is a " king-pin " of his class. The 
extent of his operations may be gauged from the fact that 
when Detectives McTighe and Shore raided his place in 
Pittsburg they found in his i)rivate safe $138,000. Delaney 
himself jum])ed his bail — a trifle of $4,500 — which he 
made up to his bondsmen, and his lawyers were clever 
enough to juggle the $138,000 so that it was returned to 
the swindler, who managed to get away with most of it. 
Miller declared that he was merely a tool hired by the real 
swindlers. Schlesinger, whom he accused of being the 
real swindler, drew a salary of $200 weekly. 

Almost everywhere Delaney has worked. Colonel Rob- 



HISTORY OF THE FRAXKLIX SYXDICATE 135 

ert A. Amnion, who in this kist swindle figured as Mil- 
ler's counsel, has appeared in one connection or another. 

On February 8, 1900, Miller surrendered to the police 
and was locked up in the Raymond street jail in defatilt 
of $12,500 bail. Captain James Reynolds, who was in 
charge of the Brooklyn detective bureau when Miller 
fled, but who was transferred to a precinct in disgrace for 
allowing Miller to escape, appeared with him at police 
headquarters. He told this story: 

" 1 followed a man out of this city to a town in Canada, where 
I saw him connect with Miller in the street. I walked up to Miller 
and said * Miller, I want you.' Miller replied, ' Yes, I understand 
that you wanted me and that you were looking for me.' I told him 
that 1 had no right to arrest him there and he replied ' I know, but 
I am going back to Brooklyn.' At i 150 o'clock to-day the train 
on which iMiller arrived from Canada reached the Grand Central 
depot. There I arrested him.'' 

Here is what the New York Journal of April 2, 1900, 
had to say about it : 

'' Two men have made affidavit that they saw Captain Reynolds 
when he says he was stalking Miller in Canada, and there is other 
evidence that Miller was in New York during the entire time the 
police were assumed to be looking for him." 

Miller was put on trial April 2, 1900. Pressure was 
brought to bear to compel him to disclose the place wdiere 
was hidden at least $500,000, which it was believed was 
within his reach. At the trial more than fifty employes of 
the " get-rick-quick syndicate '' testified against him. 

Charles Schmidt, a young check- writer, identified a 
telegram written by Miller on November i6th and sent to 
10,000 subscribers. The telegram read as follow^s: 

*' We have inside information on a big deal which is to come off 
on Saturday or Monday. Big profit. Send your investment at 
once." 



136 GOLD BRICKS OF SPECULATION 

The figures on Miller's books showed this entry for one 
day: '* Guess work, $69,000." 

More than $1,000 a day was paid in commissions to 
persons bringing in new customers. Rudolph Guenther, 
an advertising agent, testified that Miller personally had 
placed his advertisement in six hundred to seven hundred 
newspapers at one time, and that ]\Iiller had paid him, 
from July 15th to November 25th, $22,000 for advertising. 
The counsel for the defendant admitted that the amount of 
surplus belonging to depositors of this syndicate and in- 
vested for their benefit and due them was $1,156,078. 

On May 30, 1900, ]\ filler w^as given a sentence of ten 
years in Sing Sing prison. 

On October 26, 1901, the hidden hoard of the Franklin 
Syndicate Swindle w^as tied up by an injunction issued by 
Judge Thomas of the United States District Court. 
Neither Miller nor anybody wdio deposited any of the 
money believed to belong to the dupes of the fraud could 
touch a cent of the $315,000 or more which had been 
secreted in various banking and safety deposit vaults in 
New ^^ork City. The injunction provided that only John 
B. Lord, Trustee in Bankruptcy, should have authority 
to gain access to the strong boxes in which lay the follow- 
ing: 

" One hundred thousand dollars in the Wells-Fargo bank in 
the name of Robert A. Amnion, transferred from the account of 
WilHam F. Miller; a package deposited in a local hank by Miller 
under a fictitious name, to be drawn by ^^liller or Schlesinger, who 
is a fugitive from justice in ILurope : $40,000 in bonds brought by 
Miller to the Wells-Fargo bank and on deposit in his name there; 
$80,000 in United States bonds hought of N. W. Harris & Company, 
in the presence of Robert A. Ammon. All other funds in the name 
of William F. Miller, the Franklin Syndicate, Edward Schlesinger, 
Robert A. Ammon, or his wife, Winifred F. Ammon, which may 



HISTORY OF THE FRANKLIN SYNDICATE 137 

be on deposit in five banks named in the injunction after January 
9, 1899." 

Robert A. Amnion said he had received money from 
Miller at the time the latter left. This was given to the 
Court. About $140,000, he said, was with Seymour, 
Johnson & Company. He also said that he had gone 
to the Wells-Fargo bank with Miller on Novem- 
ber 23, 1899, and that Miller had left checks, with 
instructions to turn over to him (Amnion) the 
total account of $180,000. Of this, $40,000 was in 
bonds, and Ammon instructed the Wells-Fargo bank 
to turn them over to Mrs. Ammon, and she subse- 
quently returned them to him. He said all of his arrange- 
ments concerning the $150,000 were made through Mr. 
Goslin, of the firm of Seymour, Johnson & Company. 

On December 13, 1901, the heaviest bail bond ever 
demanded in a criminal case in King's County, New York, 
was exacted by Judge Aspinwall, sitting in Brooklyn, in 
the case of Miller, who, after he had been sentenced, had 
obtained an order for a new trial, and was brought before 
Judge Aspinwall on a motion for release on bail. The 
bond was fixed at $72,500. 

On June 10, 1903, Miller was taken to New York 
City from Sing Sing — where he was serving a ten-year 
term — to testify for the State in the trial of Colonel Robert 
A. Ammon, charged with receiving $30,500 of the stolen 
money of the Franklin Syndicate from Miller. Miller's 
testimony was to the effect that Ammon had been his legal 
advisor, and that while he (Miller) was robbing the pub- 
lic, Ammon w^as robbing him of his ill-gotten gains. IMil- 
ler named $250,000 as the sum received by Ammon from 
him (Miller) for safe keeping and investment. Numerous 
victims of the swindle were called upon to testify. Most 



138 GOLD BRICKS OF SPECULATION 

of them were poor persons of foreign l)irth who had been 
defrauded out of their savings of a hfetinie. 

After a trial lasting two weeks, Amnion was convicted 
on June 17, 1903, the jury requiring less than an hour to 
agree on the verdict. On June 29, 1903, he was sentenced 
to a term of not less than four years in State's prison, and 
on August nth following, he was taken to Sing Sing to 
serve his term. He had applied for a certificate of reason- 
able dou])t, ])ut it was denied him. 

Gullibility. 

Miller's scheme and its success was a '' Study in Gulli- 
bility." History tells, in a manner that might cause a 
smile to rise to the lips and pity to well up from the hearts 
of the men of to-day, of the gullible fools of the past — those 
who almost two centuries ago sold their property and 
rushed to Paris to buy shares in John Law's Mississippi 
scheme at forty times their par value. But the smile 
should be checked and the pity smothered when swindling 
schemes, such as Miller floated with remarkable success, 
demonstrate that Jiuinan credulity is as great to-day as 
ever before. 

Our rural cousin has been the butt of the cartoonist 
and " funny " man ever since the " gold-brick " became an 
article of commerce, and he is credited with having 
acquired a choice and costly collection of these bricks. 
Steeped, as he is supposed to be, in primitive innocence, 
the world at large considers him '' easy" ; while his cousin 
of the metropolis is deemed '' wise " and not in need of 
a guardian. I confess this was my creed until experience 
caused me to weaver and grow suspicious, and then finally 
to abandon my faith in the wisdom of the assumption en- 
tirely. A study of Miller's schemes completed my change 



HISTORY OF THE FRANKLL\r SYNDICATE 131) 

of heart and now my entire sympathy goes out to the 
gulHble residents of the great cities. My position is logical 
and is based on stern facts and on figures that cannot lie. 
Let us take up the lesson that the boy Miller teaches us. 

Could anything be conceived by the ordinarily intelli- 
gent citizen that would be a greater insult to his common 
sense than the preposterous offers made by the Miller 
" Syndicate " headed by a beardless youth? The offer of 
ten per cent a week is proof conclusive of fraud and hum- 
bug. It makes the swindle as clear as if the methods 
of the '' syndicate " were fully exposed. Yet crowds 
jumped at the offer frantically, and alas! the greatest 
crowds wxre furnished by Greater New York herself, her 
citizens standing in line, a jostling, fighting throng, beg- 
ging Miller to take their money. Examination of the 
books and papers in the " syndicate " office after the failure 
showed that on October 19, 1899, Miller received $14,040 
from '' suckers " in Greater New York and only $5,960 
from all outside sources. Again on November 14, 1899, 
the city gave Miller $51,172, while the outsiders contrib- 
uted only $12,182. What a showing for a great metropo- 
lis ! Truly, Father Knickerbocker has cause to blush ! 

But it is the story of something for nothing, which 
never has lost and never will lose its charm for city or 
country. People who are weary almost unto death of the 
old, plodding routine and w4io look with envy on their more 
fortunate neighbors, hear of the dazzling success of some 
outrageous speculation and decide to try their luck even 
against the protests of their own reason. It is the occa- 
sional sticcess that is the invariable bait of the tempter, 
and Miller appears to have used it judiciously. On no 
other ground can I explain the willingness, even of the 
guileless Gothamites, to take chances with him. 



140 GOLD BRICKS OF SPECULATION 



CHAPTER IV. 

ADVANCE INFORMATION BUREAUS AND BROKERS. 

Showing how sharpers pretend to have knowledge for sale and how 
apparently sane persons try to buy this knowledge (for $5 or $10 
per w^ek) which would be worth millions annually if it were 
but five minutes ahead of the public's information. 

In 1897 there sprung up in New York and Chicago a 
class of so-called *' Advance Information Brokers " or 
'' Tipsters," who claimed to have early information and 
valuable tips as to the future course of the grain and stock 
markets. 

As this new breed of sw^indlers w^as largely made up 
of well-known rascals, and the scheme was too transparent 
to withstand attacks, it has never been eminently success- 
ful outside of New^ York City, although still in operation 
both in the East and West. The sharks promised in their 
advertisements that on the payment of $10 or $20 or $30 
a month, they would give the would-be speculator " inside 
and advance information " as to the future course of grain 
and stock markets, by taking advantage of which, he would 
realize thousands of dollars profits. To make the bait 
more attractive, most of the advertisements read: ''I 
will manage your account for a percentage of the profits." 

It is marvelous to observe the manner in which the 
money is coaxed from the city and country speculator by 
these alleged brokers. Like all " get-rich-quick " schemes 
this one appeals to the cupidity of the unwary, and on the 
principle of the " green-goods " game the victim is led into 
the belief that for a small consideration he will get a large 
profit, while, in reality, he is a dupe. When the advertise- 



ADVANCE INFORMATION BUREAUS 141 

ments first appeared, I made an attack on the promoters 
through the columns of a Chicago newspaper, which appar- 
ently discouraged them in Chicago; at any rate we have 
experienced very little trouble from this class of swindlers, 
their operations being confined principally to New^ York 
City. Occasionally an attempt is made to launch such a 
scheme as theirs in Chicago, and to illustrate the scheme 
and its absolute absurdity, I use a letter mailed at Chicago 
on November 21, 1902. It is headed, "AUTHENTIC 
ADVANCE REPORTS," and reads as follows: 

HE WHO WILL NOT BE COUNSELLED CANNOT BE 

HELPED. 
Dear Sir : 

In presenting- you v/ith our plan for obtaining ACCURATE 
information pertaining to any movement which may be on foot that 
will tend to make a change in the market prices of Stocks and 
Grain, we will state that we do not make use of a chart or any 
system whatever. We have representatives in all the large financial 
centers of the United States who do nothing else but advise us as 
to what the big manipulators are doing. 

You are no doubt aware that it is the large operators who reap 
the profits in speculation, while the outsiders, or small traders, are 
the '* lambs " who are shorn. Our idea is to furnish a service that 
will put the small investor on an equal footing with the large trader, 
or, to use the parlance of the '' Street," the " insider," and we un- 
hesitatingly say that if our advice is followed fortunes can be made 
by those who have never seen Wall street, equal to that of the 
largest operator on the floor of the Exchanges. 

Our representatives are at all times in touch with the people 
who, as you might term it, rule the market. The moment any move 
is contemplated, whether to put the market up or down, we are 
notified immediately by private wire. 

If the information warrants we wire our telegraphic subscribers 
at once, and at the close of business (^ :oo p. m., Chicago time) 
mail our review of the market and forecast for the day following to 
our daily mail subscribers. It is just as important to know when to 
sell as when to buy, if not more so. Therefore, we advise our 
clients at what price to sell out or go " short " ; also at what price 
to buy in or go " long ". Were it not for the fact that we consider 



14:2 GOLD BRICKS OF SPECULATION 

all correspondence confidential we could furnish you with the names 
of a multitude of people who have made big money by following 
our advice, but we will not betray their trust even to secure patron- 
age. Having the great advantage of a private wire service to all 
financial centers, and representatives who are in close touch with the 
" Kings of Finance " you can readily see that our information is 
invaluable to anyone who speculates or contemplates entering .the 
markets. Not being connected with any brokerage firm our advices 
are not given to stimulate trade, as are the letters sent out by 
brokers. Tt is more to our interest to have you make money than 
to have you pay commissions, and we will say without the slightest 
degree of egotism, but with due pride in our continued success, that 
we can tell you when and how to make large profits in the Stock 
and Grain Markets. 

As the markets are very active at present and money-making 
opportunities are presented every day, we hope to be favored with 
a trial order for one month, knowing that our service will merit a 
continuance of your subscription. Remit by Cash, Draft, or Postal 
Order. 

Hoping to have a trial order, and wishing you success, we are, 
Yours verv trulv, * 



'' There is a tide in the afifairs of men, which taken at the flood 
leads on to Fortune." 

If this band of crooks were actually notified by private 
wire of any contemplated move by dealers, as they assert 
in the third paragraph of the above letter, they could use 
the information to make millions of dollars for themselves ; 
but they have no " information " except that which is 
generally accepted as a fact, — that people are searching 
for some swandler to hand their money to. 



'ADVISORY AXD DISCRETIONARY BROKERS 143 



CHAPTER V. 

ADVISORY AND DISCRETIONARY BROKERS. 

How the " faker ** with an " absokitely safe system of speculation " 
will manage an account for a small percentage of the winnings, 
and how it is possible for him to make his " system " safe for 
himself and fifty per cent of his dupes. 

Under the titles of '' Advisory Brokers " and " Dis- 
cretionary Brokers,"' a set of smart, kind gentlemen have 
worked out a modern swindle of no mean proportions. It 
has heen in operation for six or seven years. The scheme 
is for the '' broker " to manage the accounts of those 
" would-be " speculators who are either too busy to lose 
their own money, or, being in possession of idle funds, 
think they lack the knowledge and experience necessary to 
speculate successfully. In order to disarm suspicion the 
'' broker " of this class usually suggests that the account 
be placed in the hands of a third party, who is engaged 
in the commission or brokerage business, but that the '' dis- 
cretionary " or " advisory broker " who has '' a sure sys- 
tem of beating the markets " be given carte blanche to 
make deals for the account, — his compensation to be a 
share of the profits only. At times they are so bold as to 
ask that the funds be sent direct to them; but in either 
case it is soon '' lost." 

Schemes of this character are frequently exposed and 
the headc[uarters raided, but the promoters rarely get 
their deserts. The schemes are therefore considered 
reasonably safe. In New York City '' advisory brokers " 
became remarkably active and prosperous in the years 
1898, 1899 and 1900, but victims were so numerous and 



144 GOLD BRICKS OF SPECULATION 

the robberies so cold-blooded, that the police were fre- 
quently forced to arrest the promoters. Men with notor- 
ious records which prevented their openly engaging in 
business of any kind in New York, shut themselves up in 
out-of-the-way places, and behind locked doors and under 
assumed names advertised that they had '' sure-thing " 
tips on the markets and advance information which " would 
lead on to fortune " ; that they would act as " advisory or 
discretionary brokers " and handle or direct accounts for 
a share of the '' profits. " They usually recommended 
brokers who were in league with them, as '' a rich, safe and 
conservative house " with whom it would be safe for the 
'' sucker " to place his account while it was being " manip- 
ulated '' by the discretionary " faker." 

In New York City this '' game " was a great success 
for almost two years, until finally one concern was the 
subject of five hundred complaints to the police department, 
and thereafter the raids and arrests were frecjuent and 
sensational. Among the complaints were numerous New 
York servant girls, a prominent New ^'ork lawyer and 
former general in the army, and a miller from New Jersey. 

Accepting a share of the profits as compensation for 
handling or directing an account, is a beautifully deceptive 
and alluring proposition to the uninitiated, but it opens up 
great possibilities to the " faker." For example: Should 
" sucker " A place $5,000 with a broker and instruct the 
'' advisory broker " to manage his account, and "sucker " 
B do likewise, but ])lace his money in the hands of a dif- 
ferent broker, — the " advisory broker "would begin oper- 
ations with an assured profit of $1,666.66 in sight. He 
would buy 100,000 bushels of wheat for '' sucker " A and 
sell 100,000 luishels for '' sucker " B. One deal ofifsets the 
other and one '' sucker " is sure to win, the other to lose. 



ADVISORY AXD DISCRETIONARY BROKERS 145 

Wheat advances live cents. IJ has lost all of his money, 
but A has made $j,ooo. A pays the wise '* advisory " man 
one-third of his profits, $1,666.66, and is ready to try it 
again. The next time A will in all probability be the loser. 
Could anything be more simple ? Without a cent of capital, 
without risking a dollar, this " broker " profits throvigh the 
gullibility of the public, and obtains $1,666.66 reward for 
permitting one man to lose and another to make $5,000. 

By far the most remarkable proposition from this class 
of " brokers," was received by one of my agents in the 
latter part of 1901. The absurdity of the offer to pay 240 
per cent '' for the privilege of managing an account," which 
is "extra from the profits made on the investments," 
should have been sufficient to w-arn would-be investors; 
but undoubtedly the promoters of this scheme received 
handsome returns. The proposition was as follows: 

THE PEOPLE'S FINANCIAL NEWS CO. 
Wells Building, 18 Broadway, Room 412. 

New York, Nov. 26th, 1901. 
Dear Sir: 

We will pay $10 per month (payable semi-monthly) for the 
privilege of managing an accoimt of $50. Half of the above 
amount will be sent on the ist, and the balance of $5 will be sent 
on the 15th of each month during the whole time your investment 
remains under our conrol. The $10 you receive for this privilege 
is extra from the profits made on the investment in buying or 
selling Stocks, Grain or Cotton. We have no connection with 
Bucketshops or Discretionary Brokers and all trades made by us 
are put through authorized Brokers who are members of the Stock 
Exchange. We charge you no commission until your investment is 
doubled, after which we deduct 20% from the net profits made on 
the transactions. This is a special arrangement and should you 
wish to join us in this deal (and have a regular income of $5 every 
fifteen days besides the profits on the operations made from your 
investment in the market) you should subscribe to our plan at 
once. We will have one of the greatest markets Wall Street has 
ever seen ; fluctuations will be wide and rapid, therefore the oppor- 



U(j GOLD BRICKS OF SPECULATION 

tunities for making quick turns and large profits are better than 
ever before. If you have lost money in the market, or should 
wish to increase your income, you should not miss this offer as you 
may never have such an opportunity again. Remember we pay $io 
monthly for the privilege of operating an account of $50. You 
will also please understand that your investment with profits made 
is at all times subject to your order. All investments in this deal 
are protected against loss by our Put and Call system of operation. 
This is an entirely new plan of trading in Stocks, Grain, or Cotton 
absolutely without loss. Our capacity as correspondents on finan- 
cial matters, brings us in contact with men of renown in the financial 
world, which very often gives us inside information that enables us 
to make the above liberal offer. If you think favorably of this plan 
we will agree to accept a trial account of $25 for one month, after 
which time you are to increase this amount to not less than $50 or 
withdraw your $25. If there is any point not perfectly clear to 
you in this offer, write lis, and we will endeavor to enlighten you, 
and will upon request furnish references of unquestionable integrity 
as to our standing and worth. Don't delay in this matter as we 
will only accept a limited number of accounts with this liberal offer, 
and you may therefore be too late. Hoping to hear from you by 
return mail, we remain, ^"ery truly yours, 

The People's Financial News Co. 

Neither Dickens nor }^Iark Twain could have conjured 
up a proposition so absolutely a1:)surd, and yet it is a fair 
illustration of the whole " get-rich-c|uick " system. 

After hesitating some time, T have concluded to further 
illustrate this chapter on " advisory and discretionary 
brokers " by publishing the advertisement and letters of 
Francis P. Owings, a man once favorably known to the 
business community of Chicago as a capitalist. A ])rom- 
inent office building erected by him l)ore his name 

I submit that the lesson conveyed by this life story, the 
descent from capitalist and creator of a great building in 
the very heart of the business center of Chicago to the 
broker soliciting " discretionary " accounts for a percent- 
age of the profits and advising prospective clients to place 



ADVISORY AND DISCRETIONARY BROKERS U7 

their funds with the house of J. Overton Paine & Co., a 
notorious bucketshop, which soon afterwards '' failed," is 
too vakiable to the w^orld for me to omit through feehngs 
of dehcacy. 



STOCKS AND GRAIN. 
]\lany people with surplus cash would avail themselves of the 
phenomenal profit made in STOCKS AND GRAIN if diey but 
knew how and when to invest. 

I am a professional Stock Operator and will manage your ac- 
count on percentage. 

$i,cxx) to $5,000 cannot be invested in any other business which 
will bring such satisfactory profits. 

Francis P. Owings, 
196 LaSalle Street, Room 3. 



The above advertisement appeared in a Chicago paper, 
October 30, 1902. An inquiry addressed to Mr. O wrings 
resulted in his sending the following letters to the in- 
quirer : 

FRANCIS P. OWINGS, 

196 LaSalle St., Room 3. 

Chicago. 

Chicago^ October 31, 1902. 
Dear Sir : 

Replying to your request for details of Stock and Grain opera- 
tions entrusted to my skill, I wish to assure you that our interests 
are mutual, and my own success is identical with the success I have 
in making your Capital double itself. \\'ith $5,000 I think I can 
make $2,000 per month. With less capital, I should make 10 to 
30% according to the amount. I am very conservative — make small 
deals — take small risks — and operate on a system or method which 
almost eliminates the chance of loss, and is distinctly and entirely 
my own. 

In addition you are safe-guarded in the follow^ ing way : 

1st. You deposit capital with the Brokerage House of J. Over- 
ton Paine Company (Chicago and New York), who control seven 
seats on the Leading Exchanges. 



148 GOLD BRICKS OF SPECULATION 

2nd. Your money is in }our own name — under your own con- 
trol — and all profits credited to your account. 

3rd. I have resided in Chicago 22 years, and refer you to any 
Business House in this City you may happen to know, regarding 
my character. 

My compensation will be as follows: Should I make $1,000 or 
less per month, on your account, you are to give me one-quarter of 
the net profits. Should I make $1,000 per month on your account, 
you are to give me one-half of the net profits. 

Have check or drafts payable to J. Overton Paine Company, Chi- 
cago, to be credited to your account, with orders to allow me to 
trade for you. Yours respectfully, 

Francis P. Owings, 

196 LaSalle St., Room 3. 



FRANCIS P. OWINGS. 
Chicago. 

Chicago, III. 
Mr 

Sir : 

Now is your time to get in the Stock Market ! Dig money in 
Stocks after to-day's break. Respy., 

Francis P. Owings, 

196 LaSalle St. 
(Above letter written November 8, 1902.) 



FRANCIS P. OWINCiS. 

Room 204, 108 LaSalle Street, 

Chicago. 

Chicago, November 15th, 1902. 
Dear Sir : 

The opportunity for making money in Stocks and Grain NOW, 
is simply marvelous. There is just as much profit in SELLING 
stocks as in buying them, and I generally SELL three times as 
much as I buy. With my System, it does not matter whether they 
go lip or do-wn. I am prepared to give you loyal and faithful service, 
should you allow me to manage your account. I can make you a 
great deal of money, as your interests are necessarily my own. I 



ADVISORY AND DISCRETIONARY BROKERS 149 

should be very much pleased to have you make me a business propo- 
sition, if mine does not suit your views. 

Respectfully, 

Francis P. Owings. 

This should not fail to impress every business man 
as a pathetic case. I regret that I feel called upon to illus- 
trate in so vivid a manner a condition which involves the 
reputations of men who, if it were not for the general 
spirit of selfishness and greed, could be worthy citizens. 



150 GOLD BRICKS OF SPECULATION 



CHAPTER VI. 
''pools/' ''syndicates/' "combinations/' "mutuals/' 

ETC. 

The old and thoroughly tried system of getting the people's money 
by claiming to form co-operative pools, to operate a never-failing 
method of speculation ; the promoter claims the wisdom of Solo- 
mon ; the dupe gets only wisdom in return for his money. 

The above terms with all manner of variations and 
combinations with other terms are used by the gentlemen 
desiring to draw remittances from the people who are ever 
on the alert for someone who will promise them something 
for " next to nothing." " Discretionary Pool/' " Wheat 
Syndicate No. i8," " Special T. C. I. Combination/' 
" Cereal Mutuals/' and other similar titles are used with 
absolute abandon. 

The methods of the promoters of " pools/' " syndi- 
cates/' etc., are very simple. People all over the country 
are written to and told what excellent chances there are 
to invest money and that large returns can be expected. 
Pools are formed and those desirous of getting rich 
quickly are invited to remit before a fixed date when the 
pool operations shall begin. They invariably write the 
intended victim : " Ours is an old and thoroughly tried 
system and can be relied on 3^ear after year," and " We 
offer a medium of investment that is safe to the many who 
lack the funds to speculate successfully." 

Chicago can boast of a brand-new deal under the catchy 
title of " Cereal Mutuals," the promoter of which is a firm 
established about June i, 1903. There are three mem- 
bers in the firm, the senior member being an ex-land broker 



''POOLS," "SYNDICATES/' ETC. 151 

Order Blank to be detached and filled up where remittance is sent for COriBINATION ACCOUNT 

To ALFRED GRANT & CO., 
Bankers and Brokers, 

31 «& 33 Broadway, New York. 



.1902. 



Supplementary Stock Combination, No. 30 B. 

COMBINATION IN UNION PACIFIC AND SUSAR SHARES. 

Dear Sirs : 

Enclosed I send you which please combine with the money 

of other subscribers to the above Combination for the purchase and sale of the above 
mentioned shares, in accordance with the Rules, Customs and Regulations of the Stock 
Exchanges, subject to the special proviso and condition that my liability is absolutely limited 
to the amount to my credit, that aU profits are to be distributed pro rata among the 
subscribers to the above Combination, and that you are to receive 1/10 of the net profits as 
your remuneration, as managers for the above Combination. 



Name, 



Address, 



Order Blank to be detached and filled up where remittance Is sent for INDIVIDUAL ACCOUNT. 

To ALFRED GRANT & CO., 

Bankers and Beckers, 

31 & 33 Broadway, New York. 

1902. 

Dear Sirs: 

Enclosed I send you which please use on my 

behalf, for the purchase and sale of Stocks, Bonds, Wheat and Cotton, in accordance 
with the Rules, Customs and Regulations of the various Stock and Produce Exchanges, 
subject to the special proviso and condition that my hability is absolutely limited to the 
amount to my credit; that you are to receive one-tenth of the net profits as your 
remuneration; and that I am entitled to withdraw any amount standing to my credit on 
demand, your share of profits not to be due and payable until either I withdraw my 
account or you have doubled my capital. 

Name, _ „ 

Address, _ _ 



BLANKS PROVIDED BY OPERATORS OF " POOLS," ETC. 



152 GOLD BRICKS OF SPECULATION 

and promoter of questionable debenture, investment and 
bond companies at Cincinnati, O., and Covington, Ky., 
of which nothing remains except a record of failures and 
indictments of their officers. The other members of the 
firm are an ex-tailor from Cincinnati and a theatrical man- 
ager. Embarking in this enterprise about June i, 1903, 
they follow the time-worn custom of their class and pub- 
lish a booklet which is mailed broadcast. 

This firm, which was never heard of until its booklet 
was put into circulation in June, 1903, made the folio wing- 
statement in the second paragraph of the same : 

*' As leading brokers of Chicago, we have long enjoyed ' ground- 
floor ' facilities for keeping in the closest touch with the agencies 
which are most potential in swaging the markets, and have had 
access to such advance knowledge of conditions affecting the range 
of speculative vakies that hundreds of our regular patrons have 
profited, where otherwise they would have met with certain disaster. 
To be thoroughly competent to offer such expert advices, it is not 
only essential to have access to information gleaned from many 
inside angles, unknown to the great majority of the shrewd traders 
as well as the uninitiated, but also to possess facilities for gathering 
certain statistics which are vitally essential to the confirmation of 
facts upon which the safe investment of hard-earned dollars de- 
pends. 

'' That we possess these requisites has been amply demonstrated 
by the success which has been attained by hundreds of operators, 
who have placed confidence in our advices and acted almost wholly 
on our suggestions." 

In recommending their '' system '' to the ])eo])le they 
said: 

*' There are thousands of successful people who desire to aug- 
ment their incomes by the investment of their idle capital without 
assuming the risks which ordinary business investments entail, 
wherein the original capital is seldom if ever withdrawn and the 
possiblities of success are largely due to individual capabilities of 
the investor, or to accept the meagre interest which savings banks 
and financial securities offer. It is to this class of investors that our 



'TOOLS:' '' SY\WICATRSr ETC. 153 

' Cereal ^Iiitual ' system is most attractive and has given the most 
satisfactory results as hundreds of glowing- testimonials and per- 
sonal endorsements fully bear out." 

Their " mission " was explained in another paragraph, 
as follows : 

'* It is our mission to bring to the many the advantages hitherto 
enjoyed by the few. It must be apparent to the ordinary mind that 
when the facilities which we possess for operating in our chosen field 
of speculation are combined with practically unlimited capital, the 
success which has crowned our efforts in the past portends even 
greater achievements in the future. Every investor in our ' Cereal 
Mutuals ' shares in the profits derived from each operation in the 
exact proportion of his investment." 

Their " mature judgment " and '' especial fitness/' evi- 
dently gained w4iile making trousers and keeping chorus 
girls in line, were the suhjects of two paragraphs in this 
wonderful hooklet : 

'' It is our mature judgment that Ave can maintain our past 
record indefinitely, if not largely augment the profits wdiich w^e have 
earned for our patrons, ranging from 8 to i6 per cent per month, 
payable weekly. 

'* Our especial fitness for successful speculation in the cereal 
markets is obvious to all who have closely followed our plan of 
speculation, and have carefull}- weighed our methods and have in- 
vestigated the responsibility of our house." 

The " broker " or " promoter " who fattens on the 
spoils of his ''safe system," " advance information " or his 
" pool " or " syndicate," is likely to clash — in court — with 
his army of victims, if he varies from the usual course and 
fails to seek other climes. 

At the moment of going to press I am following the 
fortunes of a notorious '' blind pool " of St. Louis. Its ram- 
ifications were vast. The legitimate traders, in spite of 
past experiences, paid homage to the great financier while 
he was gathering in from distant points, the fimds with 



154 GOLD BRICKS OF SPECULATIOX 

which to manipulate the markets. One day the funds of 
the fools' " pool " were suddenly dissipated, which neces- 
sitated (according to the financier) the calling for more 
funds from the " investors " who had previously received 
notice of as many as forty daily dividends, without loss. 
The net result was — forty days of profit — one day of loss 
— original investments and profits gone. 

Investors — the financier said — owed the '' pool '' addi- 
tional sums which they were called upon to pay, and upon 
their refusal to comply, the " claims " were placed in the 
hands of a '' collection agency." The " investors " awoke 
from their sleep of folly — the " jar " was a severe one. 

Three thousand miles distant from St. Louis, far out 
in the glorious climate of California, the dtiped " in- 
vestors " were so numerous that they formed an associa- 
tion, employed attorneys and sent them East to investigate. 
Other groups of creditors did likewise. The developments 
justified the employment of the most eminent lawyers of 
St. Louis, and on September 15, 1903, the creditors' asso- 
ciations, of California, Colorado and other States, having a 
combined membership of seven hundred, through their at- 
torneys, filed a bill in the St. Louis Circuit Court charging 
the promoter of the " pool " with fraud. The bill was a 
*' wonder " and the largest ever filed in that court. It con- 
sisted of fifteen hundred pages. From seven to twelve 
stenographers were required to compile this monster peti- 
tion. The seven hundred claimants asked for the return of 
their moneys in amotints varying from 5^1 00 to $10,000, 
their claims aggregating $250,000. 

IF HISTORY REPEATS ITSELF, NEITHER 
THE CREDITORS NOR THE PENITENTIARY 
WILL GET WHAT SHOULD BE COMING TO 
THEM. 



FLOATING THE STOCK OF CORFORATIONS 155 



CHAPTER VII. 

FLOATING THE STOCK OF CORPORATIONS. 

How the public and prominent citizens are duped by " promoters " ; 
literary efforts of circular writers ; impossible promises and 
guaranteed dividends ; attacking savings banks and conservative 
investments. 

After examining the prospectuses, reports and letters 
of more than two hundred corporations offering their stock 
to the public in the months of Octo1)er, November and De- 
cember, 1902, I have conchided to devote some space to 
them. 

I procured all the material upon which to base this 
article by answering the advertisements of fiscal agents, 
promoters, etc., which appeared in the Sunday (October 
26, 1902) editions of the newspapers of ten cities, including 
New York and Chicago. I have now in my files fully thirty 
pounds of this sort of matter received through the mail, 
and it is still coming. Any person can obtain the same 
or similar material by investing a dollar in postage stamps 
and writing a short note to the advertisers, asking for par- 
ticulars. He will be favored with an unlimited supply of 
beautiful prospectuses, photographic views, blue prints, 
reports of mining engineers, reports of " our president,'' 
and subscription blanks, in addition to a weekly letter 
detailing progress in sinking '' shaft number 13 " and urg- 
ing an early investment in this or that particular stock, as 
" the directors are sure to advance the price next 
week to 6 cents per share, an advance of 20 per cent 



156 GOLD BRICKS OF SPECULATION 

over the present low price of 5 cents per share (par 
value $1)." In fact the volume of this matter which 
will come to him in a steady stream, wall overtax 
his waste basket, but it is a safer investment (I mean 
writing to these fiscal agents and promoters) than buying 
their shares of stock, for $1 invested in postage stamps 
with which to compensate the Government for delivering 
letters to them, will bring back frequent dividends of 2 
per cent. These anxious promoters often send a stamped 
envelope to prospective investors, which can be exchanged 
for postage stamps at the local post office. Thus an 
investment of $1 may luring back the full amount of 
the investment within a year, provided new enterprises 
continue to be l)orn in the same ratio as in 1902. 
This is the extent of and the onl\' investment I should 
advise after a painstaking examination of the claims 
of these schemes, which promise from jo ])er cent a 
year to " an independent inc(^me from a small in- 
vestment." 

It is evident, however, that the pul)lic is Ijuying freely, 
for the i)romoters and fiscal agents are ])rosperous. There 
was probably sold in 1902 v$ 100,000,000 (face value) of 
worthless stock to the American people wiio are now, or 
soon will be, looking for the monthly dividends that will 
never come. A glance at the Sunday newspapers of 1902 
would have convinced a business man that it was an unusu- 
ally good year for " suckers " and promoters, judging 
from the wonderful " last-chance " advertisements that 
were a feature of the financial pages. I submit a sample 
'' Last Chance " " ad.," which was published in a Chicago 
newspaper November 16, 1902: 



FLOATING THE STOCK OF CORPORATIONS 157 



LAST CHANCE AT 50c PER SHARE. 

P^' GUARANTEED 



601 



Annum 



BY THE 



Mining Company 



on par value of stock when mill is completed, or will buy back stock at par $1 per share. 



S20. 000,000 BLOCKED OUT READY 
FOR THE MILL, and the Hoodlum claim, 
which adjoins the Old Victor Mine, yet to 
figure on. 

This Company will stand the most 
rigid investigation— in fact, we chal- 
lenge the world to criticise this Company 
adversely. 



2,000,000 TONS OF S40.00 ORE WILL 
BE READY FOR THE MILL WHEN 
THE TUNNEL CUTS THE VEIN, 
WHICH MEANS $80,000,000 WILL BE 
BLOCKED OUT AND IN SIGHT. A 200- 
TON PER DAY PLANT CONTRACTED 
FOR and will be in full operation not later 
than April 1st, 1903. 



20/ niTADAMTPPn REGULARLY ON THE INVESTMENT 
/c VJU/AK-rVl^ 1 t-rEfL' UNTIL MILL IS COMPLETED. 

President states: "The mines much more valuable than clairned in their 

prospectus, and feel quite sure they will be able to pay much larger dividends than 
promised, which is 60 per cent per annum on the par value of stock, when mill is com- 
pleted, and that will be inside of four months." 

Present Price 50 Cents Per Share. Par Value $1.00. 

Fully Paid and Nonassessable. Price will again advance soon. 

Reader, you should look this up It is the greatest mining proposition that has been 
upon the American market in 25 years, if ever before. A few days' extension at present 
price has been granted us. Write for prospectus, 

w^m^K^^^ Brokers and Financial Agents, i—^-i— ^ 

Bradstreet's and Dun's Agencies; State Bank and Trust Company, 



REFERENCE 
Los Angeles, Cal. ; any mining journal of the 



state or prominent mining men. 



Their Inconsistency Apparent. 

Of the vast number of corporations offering their stock 
to the pubHc at " bargain-counter " prices through fiscal 
agents, promoters and newspaper advertising, there seems 
to be none without a degree of inconsistency to their 
claims (apparent upon an analysis of their literature), 
which should deter investors of average intelligence from 
becoming stockholders. 

The names of prominent persons appear ^requentl}^ in 
the list of officers or directors of enterprises of a doubtful, 
if not an absolutely dishonest character. This fact should 
have no weight, as many high-minded men have, at the 
solicitation of friends or acquaintances, thoughtlessly 
agreed to allow the use of their names in consideration 



158 GOLD BRICKS OF SPECULATION 

of a block of the stock of an enterprise which they know 
nothing about and which they have not the time to investi- 
gate. The prominent citizen is usually the first victim of 
the promoter, but he does not take any financial risk. If, 
however, his strong box were examined there would be 
found a certificate of a round lot of the stock of the cor% 
pany, which cost him nothing. 

Men capable of issuing the extravagant statements 
about the immense wealth awaiting investors in the partic- 
ular enterprise which they are floating, must, to a certainty, 
be either fools or knaves, for no intelligent and honest man 
would, while acting as an officer, an agent, or a promoter 
of a corporation, lay himself and everyone else connected 
with it, open to the charge of premeditated deception, a 
charge which the investors in almost every one of these 
bonanza schemes are sooner or later justified in making. 

If the inducements that are ofifered to the small investor 
by the promoters of these enterprises were bona fide, there 
would be no reason for selling the shares of stock below 
par ; for there are numberless capitalists who are prepared 
at all times to advance money to develop a promising enter- 
prise, be it an oil well, a gold mine, or a Mexican planta- 
tion. Capital is every ready to take a reasonable risk, but 
it is usually handled by brains, and capitalists do not sub- 
scribe for the stock advertised by promoters and fiscal 
agents. 

Methods. 

In pointing out the inconsistencies of the promoters of 
these enterprises, it is only necessary to reprint their liter- 
ature in part, and to call attention to the prima facie evi- 
dence, such literature contains, that few of these enter- 
prises are bona fide. 



FLOATING THE STOCK OF CORFORATIONS 150 

In reading the extracts from this hterature particular 
attention is called to the following methods : 

Giiarantccino- Exfravao-aiif Dividends. 

Guaranteeing Value of Stock. 

Advancing Value of Stock by Vote of Directors. 

Ridiculing Conservative Savings Banks. 

Offering Stock Far Beloiv Par Value, Which Is 
Claimed to be Earning Enormous Dividends. 

Paying Promoters and Agents Liberal Commissions 
for Disposing of Stock, at Far Belozv Par, When Such 
Stock is Paying Liberal Dividends. 

A Philadelphia fiscal agent spending immense sums in 
advertising and printing in order to effect sales of stock 
of an oil company at " 50 cents per share (par value $1) 
and earning 24 per cent in dividends," sends out a leaflet 
entitled 

" A Plain Talk to Investors '' 

which is a fair sample of the arguments used by his class. 
The leaflet reads as follows : 

" It is my desire that every ambitious man and woman in the 
United States should know about the direct channel to success that 
is opened to them through a purchase of stock in the above com- 
pany. I believe in self-made success, and have no patience with the 
man wdio deliberately sits down to wait for something to ' turn up,' 
or for somebody to die, to place him in affluence. You have heard 
it said a thousand times, perhaps, that there are opportunities on 
every hand to make money — that is to say, to compel money, that 
you already have to make more money; but just because you have 
heard it said so often, without ever really benefiting by these op- 
portunities you become skeptical on the subject, and it loses interest 
for you. Like the old saying ' there is always room at the top,' you 
fall into the habit of thinking that this talk about ' opportunities ' 
is purely theoretical without practical meaning. 

'* But let me tell you, my dear reader, that you make a serious 
mistake when you arrive at such a conclusion. It dulls your per- 



160 GOLD BRICKS OF SPECULATION 

ception, it throws you off your guard, and it costs you money simply 
for the reason that it prevents you from making money — as money 
should be made in these days, with the brain and not by the sweat 
of the brow. 

" Please don't jump at the conclusion that these remarks con- 
stitute only another of those vague statements about ' opportunities ' 
or that you can learn nothing to your advantage by following closely 
what I have to say. YOUR opportunity is before 3'OU at the present 
moment and it is a great opportunity. It may, I think, without 
exaggeration, be termed the chance of your lifetime, because it en- 
ables you to accomplish with a few dollars and in a few months that 
which you could not do with your hands in as many years. 

" To put my point plainly : Suppose that you have saved $500 
or any other nominal sum. To accumulate this has required much 
patience and perhaps some self-denial, but your $500 in cash is a 
substantial reward — so far as it goes. The average man or woman 
by close figuring, can save $500 in a year, and if you have kept up 
to this record, and can continue it indefinitely, you will in another 
year's time have $1,000, and in twenty years $10,000, plus a small 
interest earning. 

"But we have already overstepped the bounds of reason, for 
not one man or woman in a hundred has a right to hope for such 
continued good health or such favorable circumstances as would 
enable the regular saving of $500 every year for twenty years. 
Even were this possible, what is the use of living if one must con- 
stantly have his nose to the grindstone? What is your brain for, 
what is the object of the progress we are making, what is the object 
of co-operation — if not to enlighten labor and enable the brain to 
accomplish what was formerly done by muscle. 

" I want to show you how much better it would be to put your 
$500 to $1,000, or even $25, into the stock of this company, in 
preference to laying it away in idleness, while you drudge along in 
the endeavor to save a similar amount to add to it. When you work 
on these lines, it's yourself that does the work, and that $500 that 
you have laid away in a strong box somewhere does you no more 
real service than it did before you acquired it. It isn't working for 
you — unless you call it ' working ' when it draws 3 per cent interest 
a year, and, personally, I think that is the rankest kind of soldiering. 
Money that earns only 3 per cent is not returning its true earning 
power and such a rate of interest cannot be possibly satisfactory to 
any one. No progressive American, alive to the conditions of the 
country he lives in, is really satisfied with that sort of thing. If 



FLOATING THE STOCK OF CORPORATIONS 161 

you lived in Russia, China, Germany, or even England, perhaps 
you might have some reason to regard such returns as normal 
and right; but in America when your $ioo, used by some one else 
for an entire year returns to you only three dollars, what does it 
amount to ? It will not even buy you a decent pair of shoes. 

" So suppose you put your savings into the great enterprise 
which this company conducts. (I am not going to say anything 
about the enterprise itself in this talk, because if you read carefully 
the accompanying literature your natural intelligence and business 
understanding will convince you that it is really a great enterprise.) 
Such an investment, say of $500, will not make you independently 
rich, of course, but it will give you a start and a very big one. It 
will put you on your feet, it will convince you of the fact that 
opportunities really do exist and it will give you an idea of the REAL 
way to make mone3^ 

" You will draw dividends every month amounting to $10 be- 
ginning with the 15th of the month following your investment. At 
the end of twelve months you will have One Hundred and Twenty 
Dollars ($120) earned in dividends, and doubtless your stock will 
be worth at least Five Hundred Dollars ($500) more than you have 
paid for it as a tremendous rise is sure to take place in the stock, 
considering the stability of the enterprise. 

" Doesn't it occur to you that this stock would be a big bargain 
at Five Dollars ($5) a share; then what term can you apply to a 
purchase of this stock at fifty cents a share ? 

''' This is the proposition, as it stands, open to your acceptance 
or refusal. I repeat that it is the opportunity of your life time. 
Thousands of men have had similar opportunities presented to them, 
but ninety-nine in every hundred allowed them to slip by. What 
position are YOU going to take? Will you be one of the ninety- 
nine? or will you follow your reason and business judgment and 
turn this chance into lasting profit ? " 

He also sends a guarantee in the following form : 

MY GUARANTEE. 
I am a member of the Consolidated Stock Exchange of Phila- 
delphia, I will have the stock of the 

Oil Co. quoted in the near future, and I will undertake to sell the 
stock of any present purchasers at an advance of one hundred per 
cent if desired. 

PUZZLE: What does this guarantee guarantee? 



162 GOLD BRICKS OF SPECULATION 

His prize effort, however, is a printed card mailed in 
the manner of a postal card. The margins contained the 
following : 

" WE CAN PROVE ALL OUR STATEMENTS." 

"$ioo INVESTED NOW WILL MAKE YOU 
WEALTHY." 

" FORTUNE KNOCKS AT EVERY MAN'S DOOR 
BUT ONCE IN A LIFETIME. THIS IS YOUR 
SUMMONS." 

The body of the card reads as follows: 

DO YOU WANT TO GET RICH? 

If so, your opportunity is before }ou in an investment in the 

shares of the Oil Company now selling 

for a short time at 50 cents each, par value $1 full paid and non- 
assessable, and earning 24 per cent yearly in dividends, which will 
be increased from time to time until it amounts to 100 per cent 
yearly. The next advance to 60 cents takes place December 10, 
1902, and rapid advances will take place until the stock will be 
worth many dollars per share. 

It will be a lifelong regret on your part if you fail to take advan- 
tage of the opportunity to buy now while the price is so low. 

This stock will be listed on the Consolidated Stock Exchange of 
Philadelphia, thereby creating an open market. 

Remit to-day, or write for further particulars to 



This Fiscal Agent is entitled to a liheral commission 
and all expenses for selling the stock, probahly amounting 
up to 25 cents per share, leaving a net return to the com- 
pany of 25 cents per share, so that while the promised 
dividend would be 24 per cent on the amount paid by the 
investor it would be equal to 48 per cent on the amount re- 
ceived by the company. The scheme is not even plausible. 



An Ohio Oil & Gas Company prospectus said on Octo- 
ber 30, 1902: 



FLOATING THE STOCK OF CORFORATIONS 1G3 

" Par value of stock $i. 

" Only a limited number of shares will be placed at loc. The 
fortunate investor is the one who secures stock at this price. * * * 
Stock is sure to double in value within the next sixty days. • 

" A dividend of 5 per cent on a basis of loc per share will be 
paid between January ist and January loth " (year omitted). 
" Future dividends will depend upon the development and success 
of the company, but conditions are such that we can absolutely 
guarantee an equal dividend for the future." 

The outer cover of the prospectus bears these legends : 

" 5 PER CENT DIVIDEND GUARANTEED JANUARY i, 
1903." 

"40 PER CENT MONTHLY DIVIDENDS PROBABLE." 



An Ohio Oil and Gas Company, under date of October 
30, 1902, offered a limited amount of its treasury stock at 
the special price of ten cents per share, par value $1, and 
its prospectus said: 

" The Company will continue to pay its regular monthly dividend 
of 2 per cent which will probably be increased soon." 



A W^est Virginia Oil Company wrote as follows to a 
prospective investor, under date of October 30, 1902: 

'' This Company has been upon a dividend-paying basis for the 
past seven months, having paid to its shareholders each month divi- 
dends ranging from 1% to 2% upon the par value of its shares, and 
absolutely netting stockholders from 24% to 120%, according to the 
price at which the shares were bought. '•' '^ * 

" * * * The Board of Directors of this Company have re- 
cently made another allotment of 50,000 shares at the price of sixty- 
five cents, which price, however, will only be maintained until such 
shares are exhausted. It is absolutely certain that before Christmas 
the shares of this Company will be quoted at par and possibly be- 
yond, as it cannot fail, with the work it is now doing, to bring in a 
great many first-class wells before long." 



164 GOLD BRICKS OF SPECULATION 

Later on they mailed a printed report purporting to be 
an extract from an " Oil Publication " which contains the 
following paragraph: 

'' The shareholders of the company have been receiving dividends 
of 5 per cent per month for many months, and still the earnings were 
sufficient to pay that and provide a fund for acquiring new terri- 
tory." 

Notwithstanding the enormous profits of this company, 
it was necessary to advertise extensively for buyers of its 
stock at far below its par value, and the Board of Direc- 
tors, not the earning capacity, fixed a price for the stock. 
No intelligent person should be caught by this scheme. 



A GOLD MINE. 
Located in Colorado. Capitalized for $i, 500,0x30; par value of 
shares, $1.00. 

The officers of this promising " hole in the ground " 
displayed feverish anxiety to dispose of stock at 5 cents 
per share. The following reply v/as received from the 
secretary in answer to an inquiry: 

Denver, Colo., Oct. 31/02. 



Mr. 



Chicago, 111. 
Dear Sir : 

Your favor of October 29th to hand, and under separate cover, 
we this day mail you literature concerning our company and if 
you will carefully read the same you will see that we have the mak- 
ing of one of the big mines of Colorado. All we need is develop- 
ment, and for immediate development we are selling a limited num- 
ber of shares at the low price of Five Cents, par value one dollar. 

All who purchase this stock cannot but fail to realize hand- 
somely. 

"We believe that one year from to-day this stock will command 
par value and dividends can be commenced. 



FLOATING THE STOCK OF CORPORATIONS 165 

We would be pleased to have your subscription before the price 
advances, as it will be steadily advanced from time to time as de- 
velopment progresses and improvements are added at the mine. 

We trust to be favored with your subscription by return mail 
and for any further information command me. 

Yours truly, 



Dictated. Secretary. 

The same mining company published the ' following 
circular which is a threat to advance price of stock: 

A GREAT PROFIT-SHARING COMPANY. 

DON'T MISS IT! 

UP GOES THE PRICE. 

To-day 5c. January Price 6c. 

Only a few five-cent Shares unsold. 

Remember stock is not offered for speculative purposes, but 

for actual development work, in order to place the properties on a 

DIVIDEND paying BASIS as soon as possible. 

The Character and Standing of the business Men in this Cor- 
poration is sufficient to GUARANTEE that every obligation will 
be carried out to the letter. 

It is our belief, as well as the belief of experts, practical miners, 
and mining authorities that we have properties that are certain to 
yield immense wealth, and that it is only a question of time when 
every stockholder will receive in DIVIDENDS MANY TIMES 
OVER the amount of his investment. 

These Shares will GO ABOVE PAR and WILL BE WITH- 
DRAWN from the Market. 

BUY NOW BEFORE THE ADVANCE BEGINS. 

Those who buy at the start Draw the Dividends. 

$5.00 buys 100 shares. $75.00 buys 1,500 shares. 

$25.00 buys 500 shares. $100.00 buys 2,000 shares. 

$50.00 buys 1,000 shares. $500.00 buys 10,000 shares. 

Subscribers for one thousand (1,000) shares or more can ar- 
range to pay for same by monthly payments. $10 down and $5 
Monthly on Each One Thousand Shares. 

Send your subscriptions at once to 



166 GOLD BRICKS OF SPECULATION 

GOLD MINE. 
Located in California. Capital, $10,000,000. 

The stock was advertised by an agent or dealer who 
said in answer to inquiry called forth by a newspaper adver- 
tisement : 

'' The Company owns 550 

acres of fine mineral land, upon which they do not owe a cent. 
* * * The Company could not be in a better financial condition. 
The Company is located but a short distance from where Marshall 
discovered gold in 1848. * '-^ "^ 

** It is not located in a new and undeveloped camp, but is sur- 
rounded by high dividend-paying mines, guaranteeing that the out- 
put from this mine must be of the same character. * * * Our 
veins are larger and richer and, with machinery of the same capacity, 
we can do even better than they are doing. We believe this a good 
opportunity to obtain a high class stock at a nominal figure. This 
stock is fully paid and non-assessable. 

*' We are selling a small block of the treasury stock at five 
cents to raise the money to complete the development work already 
begun. This stock will go to par, which is one dollar, by the first 
of the year. We would not be surprised if it went to par before that 
time. It is only a question of a few months until the company can 
begin to take out their ore and the dividend will not be long in 
following." 



Isn't it too bad that a good stock like this should be 
peddled all over the country at half its par value and 
brokers and fiscal agents should get a liberal commission 
for selling it? This was received November 2, 1902: 

DIVIDENDS 5% PER MONTH GUARANTEED 
on par value when mill is completed. Two per cent GUARAN- 
TEED ON THE INVESTMENT REGULAR the 15th of every 
month until mill is completed. Next dividend will be paid Novem- 
ber 15th by the Company from the sale of 

High-Grade ore taken from their mines while prosecuting devel- 
opment work. 

$2.00 INCOME FOR EVERY $1 INVESTED. 



FLOATING THE STOCK OF CORPORATIONS 167 

Sixteen Millions Blocked out and in sight. 

Over 400,000 Tons of $40 Ore Ready for Mill. 

Stock non-assessable. NO indebtedness. 

SMALL BLOCK OF TREASURY STOCK TO BUILD A 
MILL AT 50 CENTS PER SHARE, PAR VALUE $1. 

This is the best investment on the market, and will stand the 
most rigid investigation. Price will soon be advanced. Call and 
see lis or write for prospectus. 

Price will advance to $1.00 per share this month. 

This was followed by a letter dated November 17, 1902, 

as follows: 

Albany, N. Y., November 17, 1902. 
Mr , 

Chicago, III. 
Dear Sir : 

We beg to inform you that the price of Stock will 

advance to 75c per share Nov. 20th. Please note our ad. in all the 
big Sunday Dailies. We have had a fight to keep the price down as 
long as we have. Twice we have been ordered to advance the price 
to $1 per share and as many. times we have succeeded in getting 
extensions of time. Our agents made strong appeals as well as our- 
selves and through our combined influence we have kept the price 
down to 50c per share one month longer than the company in- 
tended, and succeeded in getting the advance down to one-half of 
their original intention. 

You will find this one of those great mining propositions which 
comes to man perhaps not more than once in a lifetime. We hon- 
estly believe it will prove to be a better investment than the Old 
Homestead Mining Company had been or is. We sincerely hope 
you have thoroughly investigated, but in case you have not, do not 
delay the matter another moment, as the price is constantly advanc- 
ing and we do not know how long the price will remain at 75c per 
share. 

We are anxious to scatter the sales of this stock, firmly believing 
our transactions with the public through this stock will make our 
future secure. 

Hoping to hear from you with an order before the price ad- 
vances, we are, 

Very truly yours. 



168 GOLD BRICKS OF SPECULATION 

A New York firm of Bankers and Brokers signing as 
Fiscal Agents were offering the stock of a California min- 
ing company and an oil company in the months of Novem- 
ber and December, 1902. The following are extracts from 
a type-written letter sent to prospective investors who 
were attracted by the newspaper advertisements and wrote 
for particulars, but who did not respond after reading the 
prospectuses, etc. : 

" We recently wrote you enclosing prospectuses of the several 
companies we are financing, and calling your attention to the large 
profits to be made from an investment in their stock at the present 
low prices. While hundreds of our clients and correspondents have 
taken advantage of our splendid offers and have purchased the stock 
liberally, we regret very much that we have not had the pleasure of 
hearing from you regarding them. Of course, you are interested in 
these great wealth-producing industries, but are you interested 
financially? While thousands of others are receiving large divi- 
dends, are you getting your share ? Can you afford to let the 
opportunity pass whereby an investment of a few dollars now will 
return you thousands in the near future? It may be that you did 
not look carefully into the matter and understand it properly, or that 
you doubted the truth of our statements. We can assure you that 
considering the showing made by these companies, as well as the 
record made by hundreds of other mining and oil companies no 
more favorably situated, our statements are extremely consen'ative. 
Not only do we repeat and affirm all that we previously stated, hut 
zve nozv say the propositions are even better than represented. * 

"Remember our special trust fund protects all purchasers of 
these stocks fidly, and positively insures profitable results. Do not 
overlook this important feature. You are thereby afforded the im- 
mense profits of legitimate mining and oil operations, while enjoying 
absolute security on your investment. Under this plan you cannot 
possibly lose; consequently you must win. The element of specula- 
tion enters into it only as to the amount of profits you can make, not 
as to the certainty. Where else can you do as wellf ''^ ''' '^ 

'' If ziT could convince you of even one-tenth of the actual truth 
regarding these enterprises, zee are certain you zvoidd lose no time 
in takiug an interest in them. 



FLOATING THE STOCK OF CORFORATIONS 160 

" In conclusion — There must be some reason why we have not 
received your order. We would ask you to please look over our 
literature again, and if you desire further information, details, facts, 
proofs or endorsements, kindly write us and we will endeavor to 
explain matters to your entire satisfaction. We prefer to have you 
]iiake a most searching investigation concerning ourselves and the 
companies, knowing that if yon do you will make an investment that 
will result in a large and permanent income for you. We urge you 
by all means not to let this splendid chance go by. We enclose re- 
turn envelope, and trust zve may receive an early and fcn'orable 
reply." 

Accompanying this letter, which was dated December 
I, 1902, were two formidable looking '' Notices of Ad- 
vance " printed in red ink, which read as follows : 

NOTICE OF ADVANCE. 

On December 15, 1902, the price of stock of the Oil and 

Gas Company will advance from 10 to 15 cents per share. Divi- 
dends in the future will be paid at the rate of 2% monthly on 15 
cents per share. This is equivalent to an immediate profit of 50%, 
and dividends of 3% per month on stock purchased at 10 cents 
per share. Orders must be mailed not later than December 13th to 

obtain the benefit of the present price. 

Fiscal Agents. 



NOTICE OF ADVANCE. 

Owing to the excellent showing made by the Mines, 

the high quality of ore encountered, the rapid development of the 
mine and the imusually heavy stock sales, the Board of Directors 
have advanced the price of the stock from 15 to 20 cents per share, 
to take effect Dec. 15, 1902, thus giving present investors an im- 
mediate profit of 33 1/3%. As the amount of stock remaining at 
15 cents per share is limited, the allotment will probably be largely 
over-subscribed. It will, therefore, be necessary to forward sub- 
scriptions promptly, in order to obtain the benefit of the present 
price. A further advance to 25 cents per share will be announced 
soon after Jan. i, 1903. We reserve the right to reject all sub- 
scriptions received in excess of the present allotment. 



Fiscal Agents. 



170 GOLD BRICKS OF SPECULATION 

The following received January 15, 1903, shows the 
anxiety of the " Fiscal Agents " to dispose of a very valu- 
able stock at 25 cents per share (par value $1). 

NOTICE. 

The unusual conditions surrounding the developments of this 
mine compel us to ask you to move instantly, if you desire to re- 
ceive the greatest benefit. This stock is selling so rapidly that the 
first allotment will soon be entirely placed, when stock will be either 
greatly advanced in price or entirely withdrawn from the market. 

Since the within form letter was written, following telegrams 
have been received : " December 2"/ — Encountered ore most flat- 
tering; can sell all the stock here for 50c; hold sales." 

December 30th — Telegram received : ''Cut through four feet of 
shipping ore ; ledge pitching away from shaft ; indications for 
another parallel ledge ; good demand here for stock at 50c." 

January 2nd — A telegram received : ''Ore now runs $509 to the 
ton. Do not sell any more stock." 

January 7th — Telegram received :" Just caught foot-wall ledge; 
over 40 feet thick; biggest in camp." 

January loth — Telegram came to the Vice-president of the com- 
pany who is now here : "Can sell all of your stock at $2 per 
share." 

This seems to be the opportunity of a life-time. No reserva- 
tions can be given unless deposit paid. All subscriptions must be 
paid for on either regular or installment plan, as per blank. Sub- 
scriptions will be filled in order received. This is a bonanza mine, 
and prices will undoubtedly equal those of Mizpah Tonopah. If 
orders received too late for 25c per share, will return subscrip- 
tion. ACT IMMEDIATELY. 



How kind ! And yet this same stock was offered by a 

brokerage concern at Chicago at 22 cents per share at the 

same time. 

New York, Dec. 12, 1902. 
The management has decided to make no further public offering 
of its stock at present, inasmuch as the company has sufficient cash 
on hand to carry out its present plans. However, in view of the 
fact that you were one of the early inquirers in regard to the stock 
at a time when the company was unable to give full and authentic 



FLOATING THE STOCK OF CORPORATIONS 171 

information on its properties, we have prevailed upon the board to 
accept subscriptions at 25c a share until December 20. 



The last appeal of a New York promoter to a prospec- 
tive investor who had thus far refrained from investing, 
notwithstanding seven previous urgent and flattering 
offers were mailed to him : 

New York_, December 30th, 1902. 



Dear Sir: 

We note that you have failed to take advantage of our offer 

concerning an investment in the Mining Company. This 

offer holds good until next Monday, January 5th, no longer. The 
price will then be 25 cents a share, flat: — no bonus. Our offer was 
20 cents with a bonus of an equal amount, making it really 10 cents 
a share. This stock will be worth 50 cents by the ist of July. You 
must have overlooked our letter, or else did not fully understand it. 

In placing the Mine into a corporation, one-half of the 

stock was placed into the treasury for working capital : one-quarter 
went in payment for the property : the other one-quarter to be used 
for promotion expenses. This promotion stock w^e divide with the 
early investors, thus making the stockholders the real promoters. 
We do this to advertise our business, knowing full well that if we 
make money for you, you will tell your friends : you couldn't help it. 
This is the most liberal offer we have ever seen made. This plan 
has been so popular with our clients that we have decided to limit 
subscriptions to one thousand shares. No order will be accepted 
for more than $200.00, and letter must be postmarked not later than 
January 5th, 1902. Yours truly, — : . 



This is the method of urging the '' sucker " : 

ADVANCE. 

PRICE 20c THIS WEEK 

25c FEBRUARY ist 

THAT'S IT IN A NUTSHELL. 

New revelations at the mine and the condition of the treasury 

are such that on February ist the price of the stock of the 

Company will advance to 25c per share. 



1Y2 GOLD BRICKS OF SPECULATION 

We have been offering you this stock at an unprecedented bar- 
gain. We have told you that the condition of the property from the 
start warranted much greater prices for the stock than we have 
asked, and that it would advance. We have predicted nothing on 
which the time has expired that has not come true. We warn you 
now that on February ist the price of the stock will be 25c. 

Don't forget that there is no wild cat scheme about the proposi- 
tion. It is a real mine ; the ore is in sight ; the speculative work is 
done ; the property is owned by the Company by United States Land 
Patent. 

We repeat the warning — 25% advance in the price of the stock 
will take place February ist. 

The price this week is 20c. 

Orders by mail must bear January postmark to get it at that 
price. 

Terms are cash or on Installments, as you prefer. Subscription 
blanks are enclosed. Make remittance payable to our order. 

This is the last call on the 20c price. 



An invitation to invest in a plantation company : 

'' We submit for your consideration, what we believe to be one of 
the best propositions ever offered. We ask you to come into a deal 
that is capable of being developed to gigantic proportions, and on 
a basis that will surely make you a large profit. 

'' Should you invest in this proposition you will secure an in- 
terest in a business that can be developed to the magnitude of the 
steel industry started by Mr. Carnegie a few years ago, the result of 
which is the $1,000,000,000 steel company of to-day, or the great 
Telephone, Telegraph, Meat, Flour or even the Standard Oil busi- 
ness. You have just as good an opportunity to make as much 
money by investing in this proposition and thus secure your interests 
in the great company later on, as the first investors in any of the 
companies mentioned above. 

" All of these companies started small, but they were like ours, 
founded upon a business capable of producing large profits, and 
therefore being developed to their present magnitude. 

"If you turn this proposition down you will be exactly like all 
who are skeptical of every great opportunity, and after a few years 
wished they had invested when they should have done so. If you 
invest what you can afford now, you will be like the persons who 



FLOATING THE STOCK OF CORPORATIONS 173 

invested in the above named Companies — independent ineome for 
life — that is all there is to it. 

" Men like IMr. Morgan ean control all the capital needed for 
any enterprise withont advertising, but when the PUBLIC have a 
chance to buy into such enterprises it is at the TOP price. The 
merits of our proposition are equal to any of these ; the only dif- 
ference is, bv advertising, the public have an opportunity to buy at 
the BOTTOM price. 

'' If you want to take advantage of the best investment ever 
offered, do not hesitate a minute, but send your order in without 
delay, as this syndicate offer will pass in a few days, and then no 
interest can be had for twice this amount. '^ "^ *" 



The methods used to float manufacturing enterprises 
vary but slightly from those in vogue by promoters of 
mines and oil wells. A New^ York Company writes as 
follows : 

New York, November 22, 1902. 



Dear Sir : 

At the close of business next Saturday, shares in this Company 
now selling for 40c, advance to 50c. 

If you are unable to call at our office in person, or if you have 
not yet been able to completely satisfy yourself that it is the best 
investment you have ever known, we will accept your subscription 
with full payment at 40c a share, subject to return of money within 
ten days, if, after more complete investigation, you are not satisfied. 

Subscriptions accepted in this way cannot be allowed to take 
precedence over regular subscriptions at the 40c price. Our office 
will be open Saturday evening to accommodate those who have not 
been able to call before. ^= * * 

And sends the following notice printed in red ink: 

IMPORTANT NOTICE. 

The heavy demand for shares in the , indicate that the 

entire allotment of shares for sale at /\o cents, may be exhausted 
this week. It is announced positively, that the price advances at 
the close of business Nov. 22, to 50 cents — then rapidly to par. 



174 GOLD BRICKS OF SPECULATION 

Investors at a distance will do well to telegraph their reservations 
at the time of mailing remittance, as the stock must be issued in 
order of reservations. 



Some of the stock talk about the management : 

'' It is a matter of congratulation for all of us that so many re- 
liable people are becoming identified each year with the large and 
successful enterprises of the country, and it gives us a feeling of 
confidence in entrusting our affairs to men whose honesty, ability 
and integrity has been tried by years of experience in their own 
business, and who are to-day pushing forward into larger, more de- 
sirable and profitable undertakings with their mature judgment, 
characters well formed and of whose honesty of intention there can 
be no doubt. 

'' The people back of this company are gentlemen of such prom- 
inence that it stamps the proposition as gilt edge. 

" The directors and officers of the company are composed of 
prominent bankers and eminent manufacturers, whose success in 
financial and industrial circles places them at the head in their line 
of business." 



Quoting the Exceptions. 

One of the stock arguments of Fiscal Agents and In- 
vestment Brokers, offering mining stock to the pubHc : 

'' A few of the innumerable instances of great profits to early 
investors from advance in price in mining stocks : 

Ancoris Leland advanced in four years from 17c to $2.85. 
Portland advanced in five years from yc to $2.00. 
Gold Coin advanced in five years from 13c to $5.60. 
Granite Mountain advanced from loc to $80.00. 
Home Stake advanced from 50c to $400.00. 
Calumet & Hecla advanced from $2.50 to $650.00. 
United Verdi advanced from 3c to $300.00. 
Virginia Consuls advanced from 15c to $60.00. 



FLOATING THE STOCK OF CORPORATIONS 175 

Tis Nice to be a Miner. 
The beauties of being a miner by proxy are thus set 
forth by various Fiscal Agents. A New York concern 
offering an Alaska proposition says in the introduction of 
its prospectus: 

A CLEAN BUSINESS. 

There are one or two nice things about the mining industry. In 
the first place the business is clean. One does not have to rob any- 
body. The money he makes he digs out of the ground, and he 
grows richer without making anybody poorer. On the contrary, he 
is a producer; he adds to the wealth of the world. Then, again, a 
panic, that bugbear of the mercantile world, has no terrors for the 
man whose money is invested in good mining stocks. Copper, oil, 
and other mineral products, are subject to fluctuations and changes 
of value, brought about by the manipulations of interested parties, 
but the product of the gold mine is not subject to change. It is the 
standard of all values, consequently the man who is interested in a 
producing gold mine can rest assured that his investment is safe. 

A Thunder Mountain, Idaho, company starts out its 
prospectus by saying: 

''Mining is the cleanest, most legitimate and best-paying business 
on earth. You are not taking the money from your neighbor's bank 
account and adding it to your own, thereby growing rich only as 
fast as your neighbor grows poor, but you are extracting the wealth 
a wise Providence has deposited in mother earth to the credit of 
those who are willing to open an account with nature's great store- 
house of wealth, with their brain and muscle. You cash your 
checks at nature's great safety deposit vaults, and the more you 
draw out the more wealth you have added to the world." 

A Chicago Fiscal Agent prints a leaflet which he en- 
closes to prospective investors, as follows : 

MINERS' WEALTH IS CLEAN. 
By Rev. Robert Mclntyre. 
I admire a miner's wealth. It is clean. There is neither blood 
nor tears on it. It is acquired away from the scheming and cut- 
throat competition that characterizes the ordinary ventures, where 
the success of one man often means the disaster and downfall of 
some other man, or perhaps a number of men. Nobody has been 



176 GOLD BRICKS OF SPECULATION 

pinched ; nobody has been wronged. The miner who digs a fortune 
out of the ground has the satisfaction of knowing that he hasn't 
robbed a soul, even though he becomes a thousand times a million- 
aire. Then, too, there is another factor to take into consideration. 
The man who makes a fortune on the Board of Trade or the Stock 
Exchange, or in building up a gigantic business house, adds nothing 
to the world's store of available wealth. The world, in other words, 
is no richer because he is richer. He is richer rather because some 
one is poorer. The miner, on the other hand, whether he digs out 
$io or $100,000, adds that much to the world's wealth, and wnth the 
added wealth he contributes just that much to the possible amount 
of the w^orld's comforts and pleasures. 

As I look at the matter, there are few producers of w^ealth. The 
many live on the few. The only man comparable with the miner is 
the farmer. He gets what he has direct from nature, but he pro- 
duces perishable w^ealth. While he meets a want, his contribution 
to the world's w^ealth, therefore, is not a permanent one, like the 
miner's. The gold miner is to-day the king of wealth-producers of 
the country, and I honor him above all others. It is no dishonor; 
it needs no apology to emulate his example or assist him in his 
efiforts. There is the whole question in a nutshell. 



Compare the prices at which shares of stock in eight 
companies were offered for sale hy the companies, or their 
agents, and b\^ independent investment brokers at New 
York and Chicago, about November 20, 1902. It will be 
noticed that while the stock was being offered for sale by 
the companies at the figures named in the first column of 
prices, the stock could be bought of brokers at from 12 per 
cent to 56 2-3 per cent less : 

Company New York Chicago 

Price. Brokers' Price. Brokers' Price. 

1st $14.00 $9.00 $10.50 

2nd 60 .38 

3rd 1.25 .90 

^th 25 .... .22 

5th 4-00 1.75 

6th 1.25 .86 

7th 50 .30 

8th i.oo .50 



FLOATING rilE STOCK OF CORPORATIONS 177 

An Illustration of Questionable and Deceptive 

Methods. 

Among the great advertisers of 1902 was a manufac- 
turing enterprise which frequently resorted to full-page 
advertisements in the leading newspapers of the country 
in order to induce the public to buy its stock. 

I have a letter from this concern signed by its manager, 
and addressed to a person who had not invested. It reads 
as follows: 

Chicago^ Ills., Dec. i^ 1902. 



Dear Sir : 

As you are probably aware, our stock is now selling for $1 per 
share, and owing to the rapid manner in which the company is pur- 
suing its well laid plans for control of the enormous business of 

the United States, it will soon command a higher price. 

We are about to relieve one of our subscribers of balance of her 
subscription, 400 shares, which, owing to adverse circumstances, she 
is unable to handle. These shares are on the 75 cent allotment, and 
so that there will be no confusion on the books, we will sell them for 
the same price — 75 cents per share. 

Please let us know by return miail if you care to secure any of 
these 400 shares at the 75-cent price. They will be split up in lots 
of 50 or 100 shares to suit puchaser, if desired. 

By payment of 10% down you can secure all or part of these 
shares at the 75 cent price. Kindly acquaint us with your decision 
at once as we wish the matter closed this week. We are. 
Yours very truly, 



Per , Mgr. 

Of all the transparent schemes this is, to my mind, 
the easiest to see through. The concern figures for its in- 
vestors a profit of 32 per cent per annum on the par value 
of the stock and yet 400 shares at $300 were suflficient to 
call forth a letter like the above. 

Is it unreasonable to assume that every person whose 



178 GOLD BRICKS OF SPECULATION 

address the manager had received a similar letter, and 
further, that if they '' bit " in sufficient numbers to make 
a total subscription of 40,000 shares at 75 cents they were 
all accommodated with the full number of shares subscribed 
for? 

Owing to the extraordinary efforts to dispose of the 
stock of this company, I w^as prompted to carry the investi- 
gation further. On February 16, 1903, I caused the fol- 
lowing letter to be addressed to the company : 

Gentlemen : 

I have been receiving your circular letter, etc., for some time, and 
now I feel as though I should like to invest a little money in it, as I 
think it will be a good thing. How much will you charge me for 
fifty shares, and how soon could I get them after I sent for 
them? Please let me hear from you as soon as you can, and I will 
be much obliged to you. Yours truly, 



The reply from this company was dated February 19, 
1903, and speaks for itself: 

Mr. 



Dear Sir : 

Replying to yours of Feb. i6th, will say, that our stock is now 
selling for $1 per share (par), and should soon command a higher 
price, as the company is vigorously pursuing its plans for control of 
the business. 

One of our subscribers, a salesman for the firm of Carson, Pirie, 
Scott & Company, of this city, finds that he had subscribed for 100 
shares more than he can conveniently pay for. This is the last of 
the 75 cent allotment, and if you act quickly you may secure this by 
transfer at the same price, 75 cents. If you do not care to pay this 
all at once, you will be given ample time in which to pay your sub- 
scription. Or, if you cannot handle the 100 shares, by the payment 
of $37.50, you can secure 50 shares of this and we will sell the other 
50 shares to the first comer. 

Your receipt will reach you by return mail. Your certificate of 
stock will reach you in a week or ten days, being forwarded from 



FLOATING THE STOCK OF CORPORATIONS 179 

the Corporation Trust Company, New York City, our registrars, 
guarantors and transfer agents. We enclose latest letter sent out 
to stockholders apprising them of the progress of the company. 
Checks, drafts and money orders are to be drawn to the order of 

, Treasurer. We are. 

Yours very truly, 



Per , Mgr. 

This stock was offered in Chicago at 25 cents at the 
time the al)ove letter was written, a sale was reported at 
Boston at 15 cents and during March, 1903, brokers at 
Chicago were offering it for sale at 18 cents. August 2, 
1903, it was offered by tw^o brokers by means of advertise- 
ments in the Chicago papers at 5^ cents per share. 

Beyond pointing out the absurdities and shallowness 
of these schemes, I do not propose to waste space, for they 
are too plain to require comment. 



What We Occasionally Hear. 

It is not s-urprising that there should occasionally 
appear news items reading like the two given below : 

(By the Associated Press.) 

Des Moines, Iowa, Nov. 7. — Judge Hunger, of the United 
States District court, this morning refused to grant Letson Balliett, 
known as the '' mining king," a new trial, and sentenced him to pay 
a fine of $1,000 and to spend one year in the county jail. 

Balliett was convicted this spring of using the United States 
mails for fraudulent purposes. 

In 1900 he purchased what is known as the '' White Swan " 
mine, in Baker, Ore., which had been deserted by the original own- 
ers, and immediately began to exploit the same through the news- 
paper advertisements, and sold stock on the monthly-payment plan. 

It was shown on the witness stand at the time of the trial that 
over $180,000 was received by Balliett from small investors from all 
over the United States. It was also shown that not a dollar was 
expended upon the mine, although representations were made to the 
contrary in his advertising matter. 



180 GOLD BRICKS OF SPECULATION 

Balliett gave notice of an appeal. The case has been tried 
twice, and has cost the government fully $50,000. 

(Special Cable Dispatch to the Chicago Rccord-Hcrald.) 
Paris^ March 21, 1903. — The vendors of worthless American 
bonds and stocks have been reaping a harvest in France during the 
last year or two. According to a prominent American official in 
Paris, an elderly French widow recently came to his office with a 
certificate of stock of a mining company in America representing 
20,000 francs, for which she said she had paid several thousand 
francs, her entire fortune. The man who sold it guaranteed that 
the stock would soon be at par value, and before long command a 
premium. The interest, now due, she is unable to collect. The 
official examined the certificate and declared it was not worth the 
paper it was written on. 

Will the Government Act? 

The Chicago Tribune s Washington, D. C, corre- 
spondent evidently had good reasons for anticipating that 
the Government officials were about to " wake up " and at 
least " investigate " when he forwarded to that paper the 
following special, which was published March 22, 1903 : 

(By Raymond.) 

Washington, D. C, March 21. — (Special.) — Another crusade 
against fraudulent " get rich quick " concerns will be instituted im- 
mediately by the postoffice department. The companies involved 
are the oil, copper and gold mine corporations and similar concerns 
which publish alluring advertisements and make representations 
which manifestly are fraudulent. This crusade by the department 
undoubtedly will sound the death knell of these companies, which 
have fattened on the gullible people who give up their money in the 
hope of securing from 30 to 100 per cent on their investments. 

Complaint was received to-day by the postoffice department 
against some of the copper corporations doing business in Montana. 
The charge is made that these companies are fraudulent on their 
faces, as making promises impossible to redeem and obtaining 
money on false pretenses. Oil and gold mining companies also are 
involved in these charges, and it is anticipated that when the public 
becomes aware of the fact that these corporations will be investi- 
gated the postoffice department will be flooded with communications 



rtOATlNG THE STOCK OF CORPORATIONS 181 

containing complaints of correspondents who have been swindled 
and who will demand the return of' their money. As soon as com- 
plaints are received investigations will be ordered, and the chief in- 
spectors of the division of the detective force of the postoffice de- 
partment will be busily engaged during the next few weeks in 
obtaining evidence against questionable enterprises. 

If sufficient evidence is secured by the department detectives to 
justify such action the postmaster general will bar these copper, 
gold mining, and oil companies from the use of the mails. With 
this valuable privilege taken away it is predicted that many of these 
fraudulent concerns will retire from business forthwith. Those 
persons who have already invested money in these questionable com- 
panies will undoubtedly lose a portion of it, as from what is already 
known the officers of these companies pay themselves large salaries 
and spend enormous sums in advertising. For years corporations 
which are outrageously over-capitalized have been doing a big 
business and reaping rich harvests. Prospectuses containing state- 
ments of notorious misrepresentations are circulated through the 
country and millions of dollars have been flowing into the cofifers 
of these get-rich-quick corporations. Many of them have failed and 
the investors have suffered a total loss. 

It is surprising to the postoffice officials that complaint has not 
been made before this, so as to enable inspectors to inquire into the 
methods of these corporations. It is believed that the fact that an 
investigation into some of these concerns is being conducted by the 
department will have a great effect upon all of them, and there will 
be an immediate falling off in the tremendous business done in the 
last few years. Those who have invested their savings in these 
get-rich-quick corporations will probably lose a large portion of their 
investments, but the action of the department, it is claimed, will 
have the effect of protecting other gullible people against their 
own folly, and it is believed the end of the wildcat corporations is 
in sight. 

For five months I have waited for the promised inves- 
tigation to materiahze, but nothing has developed. It is 
very evident from the tone of the correspondent's story 
that Washington is at least aware that the people are 
being systematically robbed by these promoters, fiscal 
agents, etc., and that the United States mails are being 



182 GOLD BRICKS OF SPECULATION 

used to further schemes to defraud. Can the Government 
be aroused? 

A few hundred thousand dollars spent annually to " dis- 
infect " the mail service would save the susceptible people 
of this country at least one half of the many millions of 
dollars that they now give up to swindlers for beautifully 
engraved stock certificates. 



TURF SWINDLES 183 



CHAPTER VIII. 

TURF swindles; or, ''playing the races" and ''book- 
making" BY PROXY. 

How the race-track gambler, following a calling condemned by 
statute, succeeds in getting funds from " suckers " ; vast sums 
squandered by the gullible public, first in gambling on the honesty 
of professed gamblers, and secondly in gambling on the gam- 
blers' ability to win money at gambling. 

For several years past a class of schemes that may 
well be grouped under the general term of " Turf 
Swindles " has flourished, while the victims, who number 
tens of thousands, dare not raise their voices in protest or 
complaint, well know^ing that they would not only be the 
butt of ridicule in their community, but also that the world 
at large would rather rejoice at their losses, and courts 
and juries would probably waste little sympathy on them. 
Consequently the safest swindles operated to-day are those 
having race-track betting for their basis. 

In the latter part of 1902 there were upwards of twenty- 
five of these schemes in operation in the United States. 
New York City was the headquarters for about ten of 
them, and the balance were located in St. Louis, Chicago, 
New Orleans, San Francisco, Cincinnati and Brooklyn. 
Their prosperity was evidenced by the ability of managers 
to buy advertising space in the leading newspapers, to 
pay the printer for the most elaborate booklets, circulars, 
etc., and Uncle Sam for postage stamps, with which they 
were extremely liberal, usually sending a stamped envelope, 
for reply, to prospective investors. 



184 GOLD BRICKS OF SPECULATION 

By answering the advertisements which appeared in 
the various newspapers, I secured the hterature of twenty- 
one of these concerns that were in active operation during 
October, November and December, 1902. A careful ex- 
amination of their " terms " and '' methods," as stated in 
their pubhcations and letters, can be briefly stated. They 
are divided into three classes, viz : 

1. Those who bet on the horses, either at the race 
track or in pool rooms. 

2. Those who make books, or accept the bets of the 
people who wish to bet on the horses. 

3. Those who run racing stables and, in addition, 
either make books on the races or bet on some particular 
horse in each race 

The minimum amount they will accept from investors 
varies from $1 to $50, the maximum being unlimited. 
They usually guarantee a weekly dividend of from 3 per 
cent to 5 per cent, or from 1 56 per cent to 260 per cent per 
year, with additional quarterly dividends varying with the 
success of the enterprise, but usually not less than i per 
cent per week or 52 per cent per year. 

Those that fail to guarantee the dividend point to 
a record of fabulous earnings up to the present time. In 
one case it reached 2,240 per cent in one week. 

The commission charged the '' investor " for handling 
his funds varies from 5 per cent of all winnings by a Chi- 
cago concern to 33 1-3 per cent of all winnings by a New 
York firm that are " sure-thing " players and have the 
very best '' stable information." Dividends are remitted 
weekly or may be added to the principal or original in- 
vestment. 

Their booklet (or as one Chicago manager of a con- 
cern which recently disappeared designated it, '' our bro- 



TURF SWINDLES 185 

cluire '') is usually a work of art, gotten up regardless of 
expense, with the sole intent and purpose of taking a 
'' fall " out of the poor savings banks and mortgages 
" which can pay only 3 per cent or 4 per cent per year ; 
earnings equal to one week's earnings (every week in the 
year) on the race tracks." 

Extracts which I give below from the literature of 
five of these concerns offer a fair criterion for the whole 
mass which I have before me, and demonstrate the turf 
swindlers' method of extracting money from the unsophis- 
ticated. Fully 25 per cent of their " investors " are 
women, while the whole number who contribute to their 
scheme is made up of persons who would not be seen bet- 
ting at a race track or pool room, but who have consciences 
that will permit them to make money " honestly or other- 
wise." 

Argument of a firm of so-called " Expert Handicap- 
pers " of New York City, who bet on the races : 

" There has never been a week since we started in business when 
we did not pay a dividend. The smallest dividend we have ever 
paid for any one week was $6.50 for every $100 invested. We 
average about $9.00 per week on each $100. 

" An investment with us is safer and brings better returns than 
bookmaking, or any other form of speculation." 

Argument of a firm of so-called '' Turf Commission- 
ers " of San Francisco, which claimed to be betting on the 
races, guaranteeing 4 per cent weekly: 

" There is no kind of speculation that affords so great an oppor- 
tunity for making money rapidly on a small capital as playing the 
races on a business-like and systematic basis. Our average weekly 
profits usually range from 4% to 8%." 

Argument of a so-called '' Book-maker " of St. Louis, 
who guarantees 5 per cent weekly dividends to investors: 



186 GOLD BRICKS OF SPECULATION 

" We make books and allow the betting public to place the 
money. The man who bets has one horse running for him — the 
bookmaker has the rest. For this reason the odds are all in favor 
of the bookmaker and if he understands his business he is certain 
to make money.'' 

Argument of a firm of so-called " Turf Commission- 
ers " of Chicago, who claim to make books on the races : 

" Our plan insures a steady income on a small capital, such as 
no other company offers and far eclipses any mining, oil, or other 
stock investment." 

Argument of so-called racing stable concern of St. 

Louis, guaranteeing 3 per cent per week to investors of $50 

and upward : 

" We have a large stable of race horses, which we run at all 
tracks winter and summer ; we make books wherever racing is con- 
ducted and the proposition we manage pays so well because we 
know how to run it to that end." 

(SEND THIS SLIP WITH REMITTANCE.) 
NO ACCOUNT RECEIVED OF LESS THAN $50. 



QEORQE F. STONE. 

Turf Speciaust. 

Brooklyn, N. Y. 

I hand you Dollars to be used by you in speculating for me, according 

to your Two Horse Wire plan of Turf Speculation. You are to play one-fifth of the amount of 
capital, on each special, placing the money to win and also for place. You are to mail me your 
selections each day, mailing the same not later than i P. M. You agree to operate the account, 

making no charge until winnings equal capital invested; after that 20 per cent of all winnings you 
are to deduct, and send me the balance by Money Order with statement, each week. I can close 
my account and withdraw any balance due me on demand. My liability is strictly limited to above 
amount. 



A "turf specialist's" REMITTANCE blank. 

The police and postal authorities occasionally swoop 
down on these concerns, but no vigorous and well-directed 
prosecution sufficient to make the occupation a precarious 
one has been inaugurated. It is to be hoped that measures 
will be adopted tending to bar these schemers from the 
use of the mails. 



TURF SWINDLES 187 

In the past three years there have been so many poHce 
raids, failures and scandals in connection with turf invest- 
ment companies, which have been given wide publicity by 
the press, that it seems almost inconceivable that new vic- 
tims could be found, — but the schemers find them, for they 
continue to conduct their swindles. 

The Chicago police have raided the offices of as many 
as six of these swindles in one day, and the story of these 
raids was published widely. 

Detective Wooldridge led the officers on February 2;^,, 
1900, when the following concerns were raided: 

Co-Operative Trust Company. 

Turf Investment Company. 

Inter-Ocean Commission Company. 

Security Savings Company. 

Investors Protective Association. 

D. W. Moody. 

The papers, books, and '' big dividend " circulars of 
these concerns filled several wagons. The police estimated 
that over $500,000 had been lost by the " investors " in 
these concerns, which, notwithstanding some of the high- 
sounding names adopted by them, were all turf swindles. 
Raid after raid has resulted in practically ridding Chicago 
of these vampires, but they seem to thrive wherever they 
are permitted to exist. 

The turf swindle was prosperous until February, 1903, 
when the crash among the St. Louis contingent precipi- 
tated a " run '' on all of the concerns then in operation. 
As it was not the policy of the swindlers to " pay," they 
either closed their doors and fled or the police conveniently 
interfered with their business. 

Prior to the crash at St. Louis, there were several no- 
table failures and disappearances. On July 9, 1902, the 



188 GOLD BRICKS OF SPECULATION 

Al Fetzer Co. of Hammond, Ind., '' failed," and about a 
week prior Turf Commissioner W. W. O'Hara of Cin- 
cinnati absconded. Both of these events shattered many 
dreams of riches. In the Fetzer case heavy rains were 
said to have broken the " sure-thing " combination by 
which the company w^as to win fortunes from book-makers 
on the race tracks. 

The amounts lost by the credulous investors in Fetzer's 
scheme, which, it was declared, '' could not lose," reached 
into the hundreds of thousands. The towns that suffered 
the most were Hammond, Ind., and Appleton, Wis. It 
was reported that the people of the latter town had suf- 
fered to the extent of $50,000, and dozens of small cities 
are believed to have fared almost as badly. 

The clients of the concern in Appleton included a num- 
ber of well known business men and people of all classes. 
They lost from $25 to $200 each. A poor widow who had 
put in all her savings was left penniless and was obliged 
to seek aid from the city authorities. 

Fetzer conducted a large part of his business through 
the mails. He advertised extensively in the newspapers 
and found many who were willing to '' play the game." 
Dividends of $5 a week for $100 invested were promised 
and w^ere paid punctually up to about July i, 1902. He 
said he had a system of playing the races that could not 
be beaten and the success of the early investors convinced 
the doubting ones that his system was all right. The in- 
formation of the '' snap " spread rapidly and Fetzer's busi- 
ness increased accordingly. No one thought that divi- 
dends of 260 per cent were improbable when they read of 
the '' long shots " that won races on the Chicago tracks. 

Fetzer attributed the downfall of his business to the 
rainy weather and said that he had been unsuccessful in 



^H 




[ Arnold 4 Co. l 
Stables | 


1^" 


1 1 


jMS^^ 






•^F" 


•..OT-iiCH*JlC 




Office 
Benoist Building, St. Louis, Mn. 


.. ■ . 'i?*'^ :7*-" , : >::■■'■■■ 



DESIGN OF BOOKLET COVER. 
E. J. Arnold & Co., St. Louis, Mo. 



TURF SWINDLES 189 

picking " mudders." His system of betting, which was to 
make everyone rich by the end of the summer, went to 
pieces with each succeeding thunder shower, and the in- 
vestors received the doleful information that the company 
had lost its own capital as well as the money entrusted to it. 

An investigation into the affairs of O'Hara at Cin- 
cinnati revealed a state of affairs almost beyond belief. 
More than 4,000 letters which were received within a week 
after O'Hara's disappearance were opened. They were 
from every state in the country, and many were from Can- 
ada. Amounts from $5 to $500 in checks and mail and 
express orders were enclosed. The total amount of the 
money in the letters opened was $5,518, and Inspector 
Holmes stated that O'Hara got away with $7,500 which 
came in the mail the same week, making a total of over 
$12,000 for one week's business. O'Hara's books showed 
that from July, 1900, when he commenced operations, until 
he skipped out in June, 1902, he had received from credu- 
lous " investors " the enormous sum of $465,000. 

The inevitable crash came early in February, 1903, 
and the police and grand juries at Chicago, St. Louis, New 
York and other cities got busy, but the money had been 
transferred to the pockets of the swindlers, who had the 
choice of paying lawyers and possible fines or traveling 
in foreign climes until the excitement blew over. 

The following short telegram from St. Louis to a Chi- 
cago paper briefly outlines the situation on the second day 
of the panic: 

St. Louis, Mo., Feb. 11, 1903. — Runs were made on the E. J. 
Arnold Turf Investment Company, the International Investment 
Company, The Christie & Co. Investment Company and John J. 
Ryan & Co. yesterday by hundreds of men and women who during 
the last six months have invested their savings with these co-opera- 
tive bookmaking concerns in the hope of enormous profits. The 



190 GOLD BRICKS OF SPECULATION 

International and Christie Companies paid all the stockholders who 
appeared. 

Arnold & Co., in accordance with their announcement which 
caused the panic among the " turf speculators " yesterday, refused 
to pay back any stock certificates, although still claiming to be per- 
fectly solvent and determined to pay the usual weekly dividends 
until the affairs of the company are wound up. 

At the offices of John J. Ryan, owner of the Newport Race 
Track, a riot was averted by the presence of the police ; and the 
excited investors, who were reminded that their stock certificates 
are payable only on thirty days' notice, went off in a state of rage 
and anxiety at once amusing and pitiful. 

• S SCHNURMACHER.Paix rRANKLIK 



AMERICAN CENTR.\L TRUST COMPANY' 

OlBtCTOR* 

SHtP*i>0 BAXCL.r FRANKLIN p HUN.. ss CAPITAL $1000000 S U R P L U S $ 5 O 0. O O O 

tOWARO BUOtR JOHN O M«NLC» 

OABUOCR M I MILLER 
JOHN N ORUMMONO J. JOHN A NlfS 

HENRY WGEHNER B F ROWIIi«y 

MORRIS OLASER LEO S RASSiEuR 

rBANKGRIESEDlECK B SCHNURMACHI • 

GACRUNER WM S Simpson 

JOSePM WACHIEL 



St. Louis. i,^y 15^ ^^^^ 



TO tHOM IT MAY COHCERH: 

The firm of E. J. ARHOLD & COMPAHY of this City Is one of 
our largest depositors, and we consider them amply responslhle for 
every obligation they may assume. 

AMERICAN CENTRAL TRUST COMPANY, 

Sec'y & TrecB. 

Ftc-limlle copy o( orlgiml letlet 

HOW E. J. ARNOLD & CO. INSPIRED CONFIDENCE. 

The disaster was brought about by the appointment of 
a committee by the Missouri legislature to investigate the 
" get-rich-quick " situation. St. Louis had become the 
haven of every conceivable class of swindlers, who swarmed 
there in such numbers that the legislature deemed it wise 
to look into the matter. What motive inspired it to take 
this action was a mystery. Sufficient, however, to observe 



TURF SWINDLES 191 

that when it came to following out its own recommenda- 
tion to pass laws that would drive the " get-rich-quick " 
companies of all kinds out of the State, something stopped 
the legislation. 

The investigation of the '' get-rich-quick " concerns 
in Missouri hy the State Senate Committee resulted in an 
elaborate report which was presented March 3, 1903. This 
report had the following to say of the turf investment 
companies : 

'' These institutions are of modern origin. The pioneer in this 
field, especially in this State, seems to have been E. J. Arnold & Co. 
Then followed Ryan & Co., the International, The Christie Syndi- 
cate, Brolaski, Thomas Walsh, Maxim-Gay and others. 

'' These concerns were presumably prosperous until the examina- 
tion which was begun by the Grand Jury instigated by the Circuit 
Attorney of St. Louis, Hon. Joseph W. Folk, and your present Com- 
mittee. When the crash came, company after company closed its 
doors or refused to pay back to depositors on demand, and upon 
examination of these companies, we found them to be mere shells 
with little or no money or available assets on hand, and the millions 
of dollars handled by them either paid out in dividends, squandered 
and gambled away on race tracks, or absorbed by the officers and 
managers of the said companies. 

" The evidence discloses the fact that E. J. Arnold is supposed 
to be in IMexico, the books of the said company being in the hands 
of the Grand Jury. So far as the search under legal process has 
developed no assets of Arnold & Co. except a stock farm and stock 
thereon, office furniture and fixtures, and a few hundred dollars in 
cash were found. 

" Ryan & Company claim that they have on hand $200,000 
which has been attached and garnished in the hands of the deposi- 
tories, and the same process has been used to take possession of the 
real estate holdings and other personal property. 

" George A. Dice, Inspector of the Postoffice, in charge of the 
St. Louis Department, testified that he had made an examination of 
E. J. Arnold & Co. and John J. Ryan & Co. and that on their show- 
ing Arnold & Co. had on hand $160,000 more assets than their 
liabilities ; that two different examinations of these concerns were 
made by him and his deputies and that in the last report of Novem- 



192 GOLD BRICKS OF SPECULATION 

ber and December, 1902, his report to the department recommended 
that they be cited to appear before the department and answer as 
to their Hability for criminal use of the mails and that so far as his 
report went they were notified that there was a case pending against 
them, that the ruling of the department was not in accordance with 
his recommendation; that from the evidence it appears that the 
department at Washington by some process or other unknown to 
your Committee overruled the recommendations of the Inspector, 
dismissed the cases pending against these companies, and they were 
allowed to proceed with their process of absorbing the people's 
money. Had the department at Washington acted promptly and 
properly upon the recommendation of the Inspector millions of 
dollars would have been saved to the people of the State of Missouri 
and other States. 

" In order to protect the people who are attracted by the fair 
promises and the payment of extraordinary profits or dividends, and 
to prohibit the improper and vicious misapplication and absorption 
of the money of the people who confide in the representation of 
investment companies, your committee recommends that a law be 
passed which will prohibit the doing of business by said turf invest- 
ment companies or other like institutions in this State. * * * " 

If I should moralize on the Turf Swindles it would 
only be to repeat the old story, — avarice. Nothing else 
explains why they are permitted to flourish — and rob — 
and then — a newspaper story — and no more. 

Justice, blind and decrepit, is unable to scale the insur- 
mountable barrier of the swindlers' " bank-roll." But 
there is still hope, for from Washington we hear from day 
to day that another boodler has been landed in the grand 
jury net, — thanks to President Roosevelt, — who, if he 
knew all, would do more. 



PART III 



The Tools of the Swindlers. 



CHAPTER I. 

'•'fake" trade journals. 

How pretended financial journals boost swindling schemes; how 
they aid turf swindles ; Richard Oliver's methods exposed ; how 
men of his class are aided by reputable looking, but fraudulent 
trade journals. 

A discussion of the subjects treated in this book would 
be incomplete if it did not expose and condemn the nefa- 
rious publications which are the contemptible allies of the 
bucketshop and " get-rich-quick " swindlers. There .are 
at least a dozen so-called financial newspapers or journals 
published in the interest of " fakers," and hundreds of thou- 
sands of these publications containing " write-ups " set- 
ting forth in glowing terms the wonderful achievements, 
financial stability, sterling honesty and unequaled facili- 
ties of the worst thieves that ever cursed a community, are 
printed and sold to the " fakers " for distribution among 
their prospective victims. No scheme is complete or suc- 
cessful if it fails to flood the country with these vile sheets, 
which are published for this purpose alone. Having no 
subscribers or advertisers, they rely on the element which 
is preying upon society to take their whole issue either vol- 
untarily, or, by threats, involuntarily. Occasionally one of 

m 



194 GOLD BRICKS OF SPECULATION 

these journals will be issued (without a market or com- 
mercial news item of interest) ostensibly to expose fraud- 
ulent brokers. When such is the case, I find they are the 
creatures of one set of swindlers expecting to change the 
flow of the money to their own scheme by exposing and 
trying to break down another set. 

From New York and Chicago these " fake " publica- 
tions are scattered broadcast at the expense of operators 
of all kinds of fraudulent schemes. A firm of New York 
race-horse '' fakers," claiming to pay 5 per cent per week 
dividends, advertised extensively in western newspapers. 
I had an employe address a letter to the firm, inqiiiring into 
their methods. They immediately answered, enclosing sev- 
eral imposing circulars and elaborate sets of figures, and 
under separate cover, with their name and address stamped 
on the back of the wrapper, they mailed a so-called '' Finan- 
cial Journal," which is published " when necessary," and 
for five years past has been the tool of the worst element 
among the gang of robbers that has ever infested Wall 
Street. It has now sunk to the very gutter of degradation, 
and in the interest of " turf swindlers " prints exposes of 
grain and stock swindlers, carefully omitting any reference 
to the class that is sending it broadcast. It invites inquiries 
from would-be investors as to the standing and methods 
of " concerns operating in the ^^'all Street district." It 
asks for '' a detailed statement of your dealing, if you 
think you have been defrauded." It warns the public 
against its esteemed contemporaries, " the 1)ogus so-called 
financial sheets and reporting concerns who are in league 
with them; and for financial considerations send glowing 
letters to prospective investors, advising them that these 
disreputable sharks are financially responsible and are 
reputable houses to deal with." It runs an '' Information 



"FAKE" TRADE JOURNAES 105 

Department,'' and for a consideration will furnish reports 
on firms and individuals, and for a still larger considera- 
tion will impart " confidential information for a period of 
one year." It operates a "Collection Agency " and " takes 
collections against brokers, and determines the legality of 
alleged trades." The office of the " collection system " is 
the same as that of the publication. The confiding 
" sucker," after having been robbed, gets a copy of this 
j)aper. If he is the kind that " kicks," he forwards his 
claim and is again made the victim of another branch 
of the scheme, which has for its object the heading off of 
prosecutions of swindlers as long as possible, or until they 
have acquired sufficient capital to justify disappearing 
temporarily. 

As before stated, this sheet makes no reference to 
" Turf Swindlers." It is therefore sent by that class to 
intended victims simultaneously with their literature, and 
it is significant that the turf literature contains the follow- 
ing paragraph : 

DO YOU SPECULATE 
in stocks, grain or cotton? If so, you must admit that it is nothing 
more than a gamble, and a gamble of great risk at that. In the 
stock market all is trickery ; " information " is given with the sole 
intention to deceive. Newspapers print '' news " that is given them 
for a purpose; news bureaus send out trash. It is practically im- 
possible to separate the good from the bad. 

Again, after you purchase or go " short " of some certain secur- 
ity, there may come a season of inactivity. Your funds are tied up 
and you lose time. In most instances you lose your money a^ well. 

TURF INVESTMENTS 
are radically different. Every day (if you place your account 
under our management) your funds are invested in accordance with 
our expert decisions and on our " Special Selections". 

Between the turf " fakers' " argument against stock, 
grain and cotton speculation and the expose of " fake " 



196 GOLD BRICKS OF SPECULATION 

Wall Street concerns by the journal " devoted to com- 
merce," which reaches the intended victim in the same 
mail, he or she is led to believe that turf speculation is a 
good thing. 



How THE So-Called Trade Journal Promotes Turf 

Swindles. 

The following article is clipped from a " Trade Jour- 
nal" dated February 12, 1903: 

LARGE PROFITS POSSIBLE. 

CO-OPERATIVE PLAN OF RACING AND BOOK-MAKING OFFERS EXCEL- 
LENT RETURNS ON THE INVESTMENT. NO DANGER WHEN OPERA- 
TIONS ARE CONDUCTED THROUGH RELIABLE CHANNELS. 



There is no denying the fact that most every human heing of 
the present day is imbued with an ardent desire to make money. 
As a matter of fact, provident persons have been for years putting 
their savings away in savings 1)anks and eagerly awaiting the com- 
putation and compounding of the little 3 per cent annual interest in 
order that their principal might grow, if even only the least bit. 
While such method of profit is still being practiced to a large 
extent, it is not so extensive as one might expect in this era of 
unprecedented prosperity. Rather is the surplus capital of the wage- 
earner, the professional and the business man being directed into 
channels where it can earn all the way from two to four per cent 
a week. 

There is a vast difference to the saver or investor between three 
per cent a year, or even six per cent on what are called high-class 
investments, and three per cent a week, or 156 per cent a year. 
For that reason that form of investment exemplified in the work of 
co-operative book-making and racing stables is assuming a degree 
of popularity that may be termed truly remarkable. True it is 
that the public has been severely bitten during the past two years 
by the large number of " kangaroo " brokers, who fail for con- 
venience and disappear with the money they have taken in. But 
when it is possible to find concerns in this business that are as strong 
and as reliable as many of the leading banks of the country it is a 



" FAKE " TRADE JO URNALS 1 97 

certainty that they will continue to do a constantly growing business 
as a result of fair treatment and honest methods. 

The reason that such seemingly large profits can be paid upon 
capital invested in turf operations is due to the fact that more money 
is made in racing than any other enterprise known to the human 
mind. From a go-as-you-please, haphazard proposition of several 
years ago, tlie business has been brought down to an exact science 
until there are to-day men who can operate successfully more than 
three-fourths of the time. By owning superior horses that capture 
substantial purses and by conducting admirably managed books they 
secure winnings averaging several thousand dollars a week, and in 
seeking the money of outsiders in order to enjoy greater earning 
capacity and consequently larger profits they can well afiford to pay 
as high as three and four per cent a week for the use of that money. 

In the light of these facts co-operative racing stables are becom- 
ing a more important factor than ever before, being but the applica- 
tion to the turf of the pooling principle that is to be found in practi- 
cally every other form of business enterprise. Of the several firms 
that we have been called upon to investigate in this particular line of 
business, that of A. Demarest & Co., having offices in the Temple 
Court building, Chicago, can certainly be said to bear an enviable 
reputation. Established a little over one year, the firm has during 
that time brought together one of the finest stables of racing horses 
to be found anywhere in the country, and according to a statement 
recently made by Mr. Demarest they will this year increase their 
holdings to a considerable extent by purchasing a number of the 
most promising two-year-old racers that can be secured. 

The horses of A. Demarest & Co. have won some handsome 
profits for the firm during the past year. Yet additional to this 
source of revenue, still greater profits have been made from the 
book-making department of the business. The firm solicits sub- 
scriptions for operating purposes in amounts of $50 and upward 
and guarantees weekly profits of no less than four per cent, which 
are paid on Tuesday of every week. An idea of what this rate of 
interest will do may be judged from the fact that during the year 
1902 the firm paid out to their clients $250 on every $100 invested 
with them, or an average of 4 4/5 per cent per week. 

Their business is not only strictly co-operative, all interested per- 
sons sharing exactly alike, according to the amount of their deposit, 
but deposits may be withdrawn entirely or in part at any time by 
the investor together with whatever interest has been earned to the 
day of withdrawal. Letters from all parts of the United States 



198 GOLD BRICKS OF SPECULATION 

show that the firm have never yet failed to produce promised results. 
In many cases testimonials are to be seen which show that the firm 
have done even better than promised, while the claim is strongly 
made that no subscriber has ever lost a dollar invested with them. 

On February 14, 1903, there appeared in the Chicago 
Tribune the following item in connection with the raids 
made by the Chicago pohce on the '' get-rich-quick " turf 
concerns : 

FILES SUIT IN ATTACHMENT. 

Thomas O. Butler, 271 Hoyne avenue, filed an attachment suit 
in the Superior court in the afternoon against Demarest & Co. and 
A. Demarest & Co. Butler claims to have loaned the concern 
$2,700, which he says he has been unable to recover. An unsigned 
letter, written on stationery headed '' A. Demarest & Co., Temple 
Court building, Chicago. A modern co-operative racing stable ", 
was filed with the attachment suit. 

This letter is dated Feb. 11, 1903, and is addressed to IMartin C. 
Freese, Cleveland, O., and guarantees not less • than 4 per cent 
weekly on every dollar invested with the concern. The officers of 
the company are alleged to have left the city. 



The '' Fake '' Trade Journal and How It Aids the 
Persistent '' Confidence " Operator. 

A simple chronicle of a condition or an event, expressed 
in language peculiar to the writer, is less impressive than 
an article illustrated by cuts, or by the reproduction of the 
exact language of the principal actors in the event de- 
scribed. Therefore in order to show the relations of 
'' fakers " and so-called '' Trade Journals,*' I shall place 
before the reader an actual case, covering a period of six 
years, which w^ill illustrate the persistency of the " get- 
rich-quick " bucketshopper and the mission of the '' fake '' 
Trade Journal. 

In the early part of 1896 R. D. Oliver & Co., " Com- 
mission Merchants," New York City and Chicago, with 



''FAKE" TRADE JOURNALS 199 

and unenviable record extending back several years, was 
flooding- the country with letters, and advertising exten- 
sively in newspapers. 

Oliver was the only visible member of the concern ; 
he had no connection with legitimate Exchanges and was 
notoriously a bucketshopper. 

To illustrate his class of literature I quote two para- 
graphs from a letter in my possession, which Oliver had 
mailed to a gentleman in Kansas : 

" "^ '•' " If you have ever made any unprofitable investments 
in grain and stocks, it was probably because you lacked sufficient 
margin, was unacquainted wuth the prevailing conditions, or dealt 
through some broker who did not have your interests at heart. 
There are a great many irresponsible brokers, both in Chicago and 
New York, and any investor ought to be very careful with whom 
he does business. 

" Our Mr. Oliver has been connected with the Chicago Board 
of Trade for the past twenty-two years, and can refer to any mem- 
ber of that organization as to his honesty and financial standing. 
We also refer by permission to the Globe National Bank, Chicago. 
Our superior connections afford us the best possible means of receiv- 
ing good information regarding the markets, and we take pride in 
the fact that our customers made profits last Spring on the advance 
in Wheat, and also on the recent decline, by following our 
advice. * * * " 

In September, 1896, the postoffice authorities at Wash- 
ington issued a fraud order denying the use of the mails 
to R. D. Oliver & Co., and twenty-seven other fraudulent 
concerns in Chicago. Oliver promptly established the 
firms of Richards, Fremont & Co. (his given name is 
Richard) and J. W. Wrenn & Co., the latter name selected 
evidently by reason of its similarity to that of J. H. Wrenn 
& Co., a highly reputable New York Stock Exchange and 
Chicago Board of Trade house, with offices in Chicago, 
But again the Government acted promptly and in Decern- 



200 GOLD BRICKS OF SPECULATION 

ber, 1896, Richards, Fremont & Co. and j. W. Wrenn & 
Co., together with ten others of their ilk, were the subjects 
of a fraud order and were obhged to discontinue business 
as the postoffice refused to dehver mail to them. When 
a letter arrived addressed to either of the concerns it was 
stamped " fraudulent '' and returned to the writer. 

The ordinary " faker " certainly would feel like throw- 
ing up his hands, or at least seeking new fields, after such 
discouragements as three fraud orders within three 
months, but not so with R. D. Oliver. 

Promptly there appeared in various papers throughout 
the country the following advertisement: 

$100 INVESTED in grain and stocks by my " Safe 
Method" will pay $1,000 this month. Write me for 
particulars. Richard Oliver, banker and broker, Chi- 
cago Stock Exchange, Chicago. 

Ja-i2-i6. 

The fraud order was against R. D. Oliver & Co., so 
by dropping his middle initial, the " & Co." and using his 
full first name, '' Richard was himself again." The Gov- 
ernment for some reason did not take cognizance of Rich- 
ard's new departure and honor him with another fraud 
order, but it had occasion to deal with him later on, as* 
shall be shown. 

A gentleman in Louisiana, seeing the tempting '' ad " 
in the New Orleans paper, wrote Oliver and received by 
return mail very positive assurance that a fortune awaited 
him if he acted quickly. Here are a few extracts from 
half a dozen letters received by him from Oliver : 

" ^' ^ ^^ In reply to your favor of 7th inst. would say that 
after twenty-five years' experience in speculation I am confident that 
my plan of investment on a margin of $100 or more is the safest 
and most profitable method devised. My long acquaintance with 



"FAKE" TRADE JOURNALS SOl 

the big and successful operators enables me to get the best possible 
information concerning the grain and stock markets, and as I keep 
my customers promptly informed of all that transpires they get the 
benefit of this news before it becomes public and invest accord- 
ingly. * "^^ * " 

'< * >!c * From information at hand I expect some large 
fluctuations in wheat and several stocks immediately and as I would 
like to have you get the benefit of it I advise you to invest at once. 
Should you conclude to do so please telegraph me on receipt of this 
letter stating how much money you have sent and how you want it 
invested and I will execute your order promptly and await the 
margin by mail. If recjuested I will mail you my ' Market Review ' 
regularly, free of cost, and keep you promptly informed of all invest- 
ments. I remit margins and profits immediately after deals are 
closed and consider all business STRICTLY CONFIDENTIAL. 
Trusting you will favor me with a trial order, I remain, * * '^ " 

(( >;< ^ ;.k \Yhen I say that ' $ioo invested in Grain or Stocks 
by my Safe Method will pay $i,ooo within 30 days ' I consider the 
statement very conservative, for some of my customers in the past 
have made even a greater profit on one investment. 

" I do not claim, however, that every investment will pay a profit 
of $1,000, but during the next 30 days the total profit ought to reach 
a much greater sum by judicious investment. ''' '^ * " 

" "■' =i^ ^ J have been connected with the Chicago Board of 
Trade for the past twenty-five years and can refer to any member 
of that organization as to my honesty and ability. "^ * * " 

<c ^ * '^ Whenever you are ready to, please telegraph me 
stating how much money you have sent and what you wish me to 
do and I will execute your orders promptly and await the margin 
by mail. By doing this you will save the time it would take an 
order to reach me by letter and you would also get the benefit of 
the present low prices. * * ''' " 

" * * * If you wish me to invest for you on my judgment 
please state the fact in your telegram and I will do my best to make 
you some good profits. * * * " 

Allowing forty-eight hours for his first letters to the 
Louisiana gentleman to reach him and be digested properly 
Oliver wired him as follows : 



202 GOLD BRICKS OF SPECULATION 

Have profitable information on wheat; invest quickly.- Tele- 
graph orders. Answer. Richard Oliver. 

Failing to draw^ the $ioo out of the intended victim, 
Ohver wrote him some twenty days later, as follows : 

'' Since I telegraphed you advising an immediate investment 
July Wheat has advanced about 7 cents per bushel, and to show you 
what a large profit could have been made had you followed my 
advice I submit below an exact copy of a statement rendered to one 
of my customers several days ago, with the exception of the name 
and place of residence." 

Then followed a statement showing a net profit of 
$803.25 after deducting Oliver's commissions of $89.25 or 
10 per cent. Commenting on this deal Oliver says: 

'' The above investments were made by my ' Safe Method ' plan 
on a margin of $100, and after there was a profit in the purchase 
there was no possible chance of the investment showing a loss, for 
the reason that I always follow my motto ' Never to take a loss 
after there has been a profit in a deal' '•' '^ '^ " 

And in closing this letter he volunteered the following 
advice : 

" ''•' '^ * Don't let another big money-making chance escape, 
but telegraph your orders immediately on receipt of this letter, 
stating how much money you have sent and what you wish me to 
do and I will execute them promptly and await the margin by mail. 
If you wish me to invest for you on my judgment please state the 
fact in your telegram and I will do my best to make you some 
money. * * ^ " 

The papers in this case all came into my hands some 
time after the failure of their writer to inspire the Louis- 
iana gentleman with enough confidence to send him $100. 

Oliver's " Safe Method " did not receive the approval 
of the Government, however, and finally his victims, or a 
few of them, complained, with the following result : 



"FAKE'' TRADE JOURNALS 203 

(Chicago Record, December 3, 1899.) 
PROMISE BIG PROFITS BUT UNCLE SAM STOPS 

IT ALL. 



RICHARD OLIVER PROMISES A SURE THING SPECULATION. 



Swindling by means of the United States mails was the charge 
on which Richard Oliver, calling himself " Banker and Broker ", 
•was arrested yesterday. Oliver was released on a bond of $1,500, 
which he deposited in cash. 

Oliver had an office in the Stock Exchange building, and here 
is the language of the advertisement he is accused of scattering 
broadcast : 

" Safety in Speculation. One Hundred Dollars Invested in 
grain or stocks by my safe-method plan will pay $1,000 profit within 
thirty days. References furnished. Write for particulars. RICH- 
ARD OLIVER, Banker and Broker, Stock Exchange, Chicago." 

INSPECTOR EXPLAINS THE CASE. 

Oliver was arrested by Deputy United States Marshal Thomas 
Middleton on a warrant sworn out by Postoffice Inspector Walter 
S. Mayer. Inspector IMayer said : " Oliver seems to have been 
receiving money for investment and putting it into his own pocket. 
In the case against him he claims to have made a trade in Chicago 
Gas with Partridge & Co., Brokers, who went out of business a 
year ago. A representative of the firm stated that it never had any 
dealings with him. There are indications that he had made from 
$50,000 to $100,000 out of his scheme." 

Oliver said : " My arrest is probably the result of a general 
shaking up among speculators. I enter a general denial to the 
charges against me. The man making the complaint upon which 
I was arrested had an account with me a year ago. He lost, and 
requested the return of his money, a request that of course I could 
not grant. The report that I have made large sums of money out 
of my business is false. It has not paid me $3,000 a year." 

The complainant against Oliver is P. Finn, y22 Market street, 
Shreveport, La. He claims that the alleged speculator received 
$150 from him on fraudulent promises to invest it in Chicago Gas 
stock. It is asserted that Oliver has done a speculative business in 
the past under the names of Richard Freemont & Co. and J. W. 
Wrenn & Co., and that in each instance his mail was stopped. 



^04 GOLD BRICKS OF SPECULATION 

(Times-Herald, Chicago, March 21, 1900.) 
OLIVER IS HEAVILY FINED. 



ALSO ORDERED TO REFUND MONEY OBTAINED THROUGH ALLEGED 

FRAUD. 



Richard OHver, a broker in the Stock Exchange building, 
pleaded guilty in the United States District court to the charge of 
having used the mails to defraud country people. Judge Kohlsaat 
imposed a fine of $1,000 and costs and ordered the defendant to 
refund the money, amounting to almost $5,000, which he received 
from his victims. Oliver is said to have promised his correspond- 
ents that on investments of $100 he would return them $1,000 
within a month. He claimed to have a sure method of following 
stocks up and down until they yielded a profit. 

Having succeeded in reaching what is usually con- 
sidered the climax in the career of a '' get-rich-quick 
faker," viz : conviction in the United States Courts for 
'' using the mails to further a scheme," it would be a fair 
assumption that he would retire on his hard-earned laurels. 
But not even a conviction and fine could keep Oliver down. 
About October 15, 1901, a concern with the Oliver ear- 
marks embarked in business as " Bankers and Brokers " 
under the firm name of M. B. Flower & Co. Oliver was 
the brains and the active man in the concern, and in Au- 
gust, 1902, M. B. Flower & Co. was succeeded by R. D. 
Oliver & Co. 

The following notice appeared in a Chicago evening 
newspaper of August 9, 1902: 

A. NEW FIRM. 



R. D, OLIVER & CO., BANKERS AND BROKERS, SUCCEED TO THE BUSINESS 
OF M. B. FLOWER & CO. 



Mr. R. D. Oliver and others, formerly the junior partners in 
the well-known firm of M. B. Flower & Co., Chicago Stock Ex- 
change building, have purchased the interest of Mr. M. B. Flower 



J 



" PAKE" TRADE JOURNALS 205 

of that firm and will conduct it in the future under the name of 
R. D. Oliver & Co. 

Tlie retiring partner, Mr. Flower, has not taken an active part 
in the business for the last six months and the management is prac- 
tically unchanged. 

Mr. R. D. Oliver, who will have charge of the business, is a 
well-known stock and grain man, being in the trade for almost thirty 
years, and will give his personal attention to all matters pertaining 
to the business. The new firm has private wire connections to all 
the principal stock and grain markets in the country and ofifers 
unequaled facilities for the execution of orders in stocks, bonds, 
grain, provisions, or cotton for cash or on margins. 

Thirty years of active life in the markets particularly fits Mr. 
Oliver for his new venture and patrons are assured of careful and 
prompt service. The firm's office is fully equipped for the accom- 
modation of customers and all news and quotations pertaining to 
financial affairs are at hand. 

Thereafter there appeared extensively, particularly in 
the Sunday editions of newspapers of several cities, the 
following- advertisement : 



WHEATANDCORN 



RIIY 

■ M I I ■ $100.00 invested in Grain or Stocks 
m0 %0 I by our "Safety Valve Plan" 
^ should result in a profit of 8500.00 to 

Siooo within 30 days. Write for particulars and 
send for our free book, '•Modern Methods for 
Safe Investments." 

Richard Oliver & Co., Bankers & Brolcers, 

Chicago Stock Exchange BIdg., CHICAGO. 

I procured the free book, " Modern Methods for 
Safe Investment,'' as well as R. D. Oliver & Company's 
initial letters to such persons as wTote for particulars. 
The most attractive paragraph in the book was that which 
followed the " Introduction " and was entitled " Responsi- 
bility.'' It read as follows : 

" Determining the absolute responsibility and solvency of the 
house through which you operate is most essential, for what can 
be more disappointing than to direct a series of successful stock 
operations, only to lose the entire profits in the end through the 



206 GOLD BRICKS OF SPECULATION 

failure of the firm with which you are trading. The conscientious- 
ness of your broker is also a most important matter for considera- 
tion. If he be careful, conservative and honorable it must neces- 
sarily enhance the welfare of the customer. The broker, whose 
only recompense is his legitimate commissions for executing your 
orders and whose market advices are sincere and intended for the 
success of his customers, can make your market efforts profitable, 
and through him success is doubly assured." 

The book was divided into a number of chapters. Here 
are a few of the interesting titles : 

" // Our Customers Prom, We Profit r 

'' Success Assured." 

" How to Trade With Safety." 

''Methods That Prove Successful." 

Then followed a complete guide to the beginner, includ- 
ing '' terms and phrases " used in the trade, how to open 
an account, etc., — in all thirty-eight pages of the usual 
bucketshop literature. 

The letters were of much the same tenor as those al- 
ready quoted, but I shall quote from one letter which seems 
to indicate that the " investors " were inclined to favor 
'' Oil, Land and Mining Stocks." 

'' There is not a brokerage house in the country giving their cus- 
tomers a service equal to ours, and we are willing that it should be 
tested against all others. Those dealing through us are making 
money and if you will place your account with us, we are confident 
that our service will merit a continuance of your patronage and 
support. On receipt of a remittance of $ioo or more, we will 
advise you by telegram, at our expense, when to make and close 
investments, and if you will act on our advice quickly, we know you 
can make money. We do a strictly commission business and our 
entire charge is ]4> cent per bushel on Grain, 34% on Stocks and 
lo cents per bale on Cotton. 

'' Our service is for the intelligent traders who are not foolish 
enough to put their money into the ' Blind Pools ' or ' Syndicates ' 
but who are too far away from the markets to trade except at a 
great disadvantage. With our service you can operate your account 



''FAKE" TRADE JOURNALS 207 

on an equal footing with the professional traders, as we place at 
your disposal the same news and information on which they realize 
safe and large profits. We give the out of town dealer the same 
advantage as the operator who stands by the ' pit ' and sees his 
order executed. 

'' Never before in our experience have such exceptional condi- 
tions been presented as those of to-day for investors of compara- 
tively small capital, seeking opportunities for its safe use. The 
markets of this Fall and Winter will certainly present opportunities 
unsurpassed, and the brilliant future in store for American Stocks, 
Grain and Cotton can hardly be estimated by even the most con- 
servative. If the ' Dunces ' who are buying the worthless stocks 
of Oil, Land and Mining Companies (the alluring advertisements of 
which fill our daily papers) are not heartily sorry before the year 
closes that they did not use their money where money could be 
made, you can put us down as being poor prophets. 

" The fact that all investments are made on the regular Ex- 
changes is a guarantee of our responsibility. * * '^ " 

The recipient of the book and the letters had '' written 
for particulars/' and within a few days, like the gentleman 
in Louisiana, received a telegram as follows : 

Have unusually valuable information. Advise immediate invest- 
ment. Telegraph answer. Richard Oliver & Co. 

Verily, Richard was overflowing with information ! 

The " faker '' relies absolutely on the intended victim's 
superficial examination into his credentials and statements ; 
the rankest falsehoods are written and published with an 
abandon that can only be accounted for, on the hypothesis 
that experience teaches the ''faker " that the more reckless 
his claims are, the greater his chances of success in his 
effort to induce the innocent investor, or would-be specu- 
lator to trust him. 

Oliver furnished an illustration. In October, 1902, 
he had printed and mailed a two-page circular entitled: 
" Important! The Safety Valve Plan of Investment 
in Grain and Stocks/' 



208 GOLD BRICKS OF SPECULATION 

After mentioning '' Our 30 years experience ^' and the 
fact that '' WHILE the grain and stock markets are 

ACTIVE AS AT PRESENT, A TOTAL PROFIT OF FROM $500 TO 
$1,000 CAN BE MADE IN 30 DAYS ON AN INVESTMENT OF 

$100 ON OUR ' SAFETY VALVE plan/ '' he then proceeded 
to prove this assertion by two statements (\vhich were 
printed in full) showing transactions by Richard Oliver & 
Co. from April 7 to April 23, 1902, three months before 
they succeeded the " well known " firm of M. B. Flower & 
Co.^ 

As this $100 investment, paying $500 to $1,000 in thirty 
days by the " Safety Valve Plan," was a '' continuous 
performance " of Oliver's, let us see what the possibilities 
were if it had worked. If any one of Oliver's victims had 
stopped to figure it out he would have found that by send- 
ing $100 to Oliver and instructing him to invest it on his 
" Safety Valve Plan " for thirty days and then reinvesting 
the profit and principal every thirty days for one year he 
would have had to his credit in Oliver's hands on the basis 
of his lowest earnings ($500 on each $100 in thirty days) 
the exceedingly tidy sum of two hundred and seventeen 
billion, six hundred and seventy-eight million, two hundred 
and thirty-three thousand, six hundred dollars ($217,678,- 
233,600), a sum probably greater than all the money in the 
world, and sufficient to at least make J. Pierpont Morgan 
and John D. Rockefeller turn green with envy. 

For the benefit of those who desired to try this 
'' Safety Valve Plan," I prepared, before the passing of 
Oliver, " A Ready Reckoner Table " so that they might 
know when the sum they were ambitious to possess was 
reached, and orders could be placed accordingly. For in- 
stance: " A " was anxious to be a plain millionaire; — he 
found by reference to this table that by investing $100 he 



''FAKE" TRADE JOURNALS 209 

could acquire %yyy,6oo at the end of five months, but if 
he reinvested he would have $4,655,600 at the end of six 
months, which was a greater sum than he desired, and 
exceeded his ambition; so he probably would have had 
to make special arrangements with Oliver to close his 
" deals " early in the sixth month when the million mark 
would have been reached. To the man who did not desire 
to own the earth but who would have been satisfied with all 
the money on the earth this '' Safety Valve Plan '' pre- 
sented great possibilities if he had had a little patience and 
$100. 

Table Showing Increase of Wealth of the Investor 

OF $100 BY the "' Safety Valve Plan of 

Investment. "" 

Amount Profit Total Principal 

Month. Invested, jo days. and Profit. 

1st $ 100 $ 500 $ 600 

2nd 600 3,000 3,600 

3rd 3,600 18,000 21,600 

4th 21,600 108,000 129,600 

5th 129,600 648,000 777,600 

6th 777,600 3,888,000 4,665,600 

7th 4,665,600 23,328,000 27,993,600 

8th 27,993,600 139,968,000 167,961,600 

9th 167,961,600 839,808,000 1,007,769,600 

loth 1,007,769,600 5,038,848,000 6,046,617,600 

nth 6,046,617,600 30,233,088,000 36,279,705,600 

I2th 36,279,705,600 181,398,528,000 217,678,233,600 

Total at end of 12 mondis $217,678,233,600 

I have found that ridicule very often will serve a good 
purpose, accomplishing ends that sound argument fails to 
attain. Hence, w^hen desirous of reaching those who will 
not or cannot be convinced by facts plainly set before tliem, 
I resort to such ridiculous illustrations as the above 
figures 



210 GOLD BRICKS OF SPECULATION 

How THE " Safety \^alve Plan '' Actually Worked. 

At a cost of $597.50 (to a victim), I have acquired a 
full and complete illustration of how the '' Safety Valve 
Plan " was worked. 

The victim, a lady attracted by the wonderful possibil- 
ity of the '' Safety Valve Plan," deposited $600 with Oliver 
in December, 1902, to be invested according to his " plan." 
He reported that he had bought for her on December 15th 
2,000 bushels of May corn, and on December i6th 2,000 
bushels of May wheat, and addressed the following letter 
to her : 

Private Wires to All Exchanges. Inrcstmcnt Department. 

Long Distance Phone 3531 Main. 

RICHARD OLIVER & CO., 

Bankers & Brokers. 

Chicago Stock Exchange Building. 

Stocks, Grain, Provisions and Cotton Bought and Sold for Cash 

or on Margins. 

Chicago, Dec. 16, 1902. 
Mrs 



City. 
Dear Madam : 

As all our news and information favors a good advance in May 
Wheat, we bought for your account at the opening this morning 
2,000 bushels of May Wheat at 'jyV2, which makes 2,000 bushels 
May Corn and 2,000 bushels of May Wheat we are now holding at 
your risk. The market closed a little lower to-day, but the informa- 
tion favoring the advance comes from a source that in the past has 
proved reliable, and we are naturally confident of making you a 
good profit oh these investments. Most of the big operators are 
buying these Grains on everv soft stop and are now holding large 
quantities of both Wheat and Corn and will not be satisfied with a 
small profit. If we find, however, that the big operators are selling 
at any time, we will do the same for you and are confident that our 
service will prove profitable and satisfactory. 
Yours respectfully, 

Richard Oliver & Co. 



'' FAKE " TRADE JO URNALS 2 1 1 

P. S. — The above investment was made according to our " Safety 
Valve Plan" and whenever we are warranted in doing it, we will 
increase your deal, so that in the event of higher prices, a larger 
profit can be made than in any other manner. 

Aside from occasional market letters there was nothing 
received from Oliver until December 31, when he mailed 
the following letter: 



Time 8 130 a. m. 
Mrs 



Chicago, Dec. 31, 1902. 



Chicago, 111. 
Dear Madam : 

We are expecting a big advance in Grain in the near future, so 
we bought for your account 4,000 bushels of May Wheat at ^6^, 
which makes 6,000 bushels of May Wheat and 2,000 bushels of May 
Corn we are now holding at your risk. This investment was made 
according to our " Safety Valve Plan " and whenever we are war- 
ranted in doing it, we will increase your deals, so that in the event 
of higher prices, a larger profit can be made than in any other 
manner. We only act according to the information we receive, 
however, and if we find at any time that the big operators are selling, 
we will do the same for you. As stated before, we will not, of 
course, guarantee you against possible loss, but if the markets go 
as we predict, your profits will greatly exceed the amount invested. 
We will keep you informed from time to time of what we are doing, 
so that you can withdraw your margin and profits, whenever re- 
quested, after deals are closed. 

Trusting this is satisfactory and hoping for success, we remain, 
Yours truly, 

Richard Oliver & Co. 

The markets ruled strong and higher and the victim 
thought she was making money. On the morning of Jan- 
uary 28, 1903, she received the following letter, which 
bore a postmark showing it to have been posted at 2:30 
p. M. the preceding day, January 27th: 



212 GOLD BRICKS OF SPECULATION 

Chicago, Jan. 26, 1903. 
Time 10 p. m. 
Mrs 



City. 
Dear Madam : 

When Wheat recently advanced we bought for your account on 
the 17th 5,000 May Wheat at 79 cents and on the 23rd 5,000 at 81^ 
and to-day 10,000 at S2}i, which makes 26,000 bushels of May 
Wheat we are holding at your risk. We also bought for your 
account to-day 6,000 bushels of May Corn at 45 J^, which makes 
8,000 bushels of May Corn we are now holding at your risk. These 
investments were made according to our " Safety ^'alve Plan '*, but 
as your deal has assumed large proportions, we will be very con- 
servative in our actions. 

Our investments in Grain are made on the Chicago Open Board 
of Trade and as May Wheat sold at 83 cents and May Corn at 46 
cents on that Exchange to-day, we did not pay the highest price for 
your purchases. The market closed a little lower to-day, but we 
do not anticipate any further decline and as Armour & Co. say 
that May Wheat will go to 90 cents and Corn to 50 cents per bushel, 
we hope to make you a large profit on your purchases. 

We are very busy to-day and as our mail will be late in getting 
out, please excuse the delay. 

Trusting that this is satisfactory and hoping for success, we 
remain, Yours truly, 

Richard Oliver & Co. 

The reader will note Oliver's careful timing- of this 
letter, ''Time 10 p. m.," and his statement in the letter: 
" We are very busy to-day and as our mail will be 

LATE IN GETTING OUT, PLEASE EXCUSE DELAY,'' also the 

fact that the letter was not posted mitil the afternoon of 
the 27th with the result, that, although the victim was a 
resident of Chicago, it was not delivered to her until 8:30 
A. M. of the 28th. But the significant part of this strange 
operation is that on the morning of the 27th and some 
hours before this letter was mailed the wheat and corn 
market broke severely; in fact, it had declined sufficiently 



''FAKE" TRADE JOURNALS 213 

to cause a loss to the victim of her $600 and all the profits 
which had accrued (if Oliver really had had the deals for 
her), amounting in all to $1,300. 

The first notice of the purchases of 5,000 bushels May 
wheat at 79c on January 17th, and 5,000 May wheat at 
81 %c on January 23rd, was the letter received on the 
morning of the 28th, — simply bait to the victim and re- 
ported after all opportunity to secure the profit in them had 
vanished. 

At noon of the 28th the lady received the following 
telegram from Oliver: 

Wheat lower margin nearly exhausted send five hundred more 
immediately advise holding telegraph answer quick. 

Richard Oliver & Co. 

Noting the discrepancies in the writing and mailing 
of the letter, the lady refused to protect further these deals 
made on the '' Safety Valve Plan," and Oliver reported 
to her that " she had lost," and furnished her the follow- 
ing statement of the deals, showing a net balance due her 
of $2.50: 

Chicago, Jan. 31st, 1903. 
Account Purchase and Sale of 34,000 Bu. No. 2 Grain. 

For Account and Risk of , Chicago, 111. 

By RICHARD OLIVER & CO., Bankers and Brokers. 
Chicago Stock Exchange Building. 

Dr. 
Dec. 15 Bought 2000 Bu May Corn at 43^ 877.50 
Dec. 16 Bought 2000 Bu May Wheat at 77^^ 1550.00 
Dec. 30 Bought 4000 Bu May Wheat at 76^ 3070.00 
Jan. 17 Bought 5000 Bu May Wheat at 79 3950.00 
Jan. 23 Bought 5000 Bu May Wheat at 81^ 4068.75 
Jan. 26 Bought 5000 Bu May Wheat at 82j^ 4143.75 
Jan. 26 Bought 5000 Bu May Wheat at 82% 4143.75 
Jan. 26 Bought 5000 Bu May Corn at 45% 2293.75 
Jan. 26 Bought 1000 Bu May Corn at 45^^ 458.75 

Com. ^c, 36.25 24592.50 



214 GOLD BRICKS OF SPECULATION 

Cr. 

Jan. 28 Sold 15000 Bu May Wheat at 78^)^ 1 179375 

Jan. 29 Sold 5000 Bu May Wheat at 783^^ 3918.75 

Jan. 29 Sold 4000 Bu May Wheat at 78% 3135.00 

Jan. 29 Sold 2000 Bu May Wlieat at 78^ 1567.50 

Jan. 29 Sold 5000 Bu May Corn at 44)4 2237.50 

Jan. 29 Sold 3000 Bu May Corn at 4434 1342.50 23995.00 



Ledger Credit, $ 600.00 597-50 

597-50 



Balance, $ 2.50 

E. & O. E. 

As to the part played by the so-called '' Trade Journal '^ 
in almost every scheme calculated to swindle the " inno- 
cent " investor, the reader can form an estimate by a pe- 
rusal of the following article, reproduced from the pages 
of a really respectable-looking sheet, copies of which were 
mailed by Oliver to all who nibbled at his bait. This Jour- 
nal claimed to contain " Reliable information for in- 
vestors," and the reader found on the 12th page of this 
particular issue (October 8, 1902) an article marked with 
blue pencil, which read as follows : 

PROFITABLE STOCK TRADING. 



Under Proper Conditions Big Money is Made in Stocks, 
Grain and Provisions — Great Care Should be Used in Se- 
lecting Brokers — Special Advantages Offered Investors. 



Every day bears witness to the fact that good profits are made in 
buying and selling stocks, grain and other commodities on the ex- 
changes of the country. If the trading is done under proper con- 
ditions it offers the best form of nivestment available for either large 
or moderate sums of money. Like all other forms of business it 
must be carried on with judgment and knowledge, and these are 
acquired by experience in this line as in all others. 

The firm of Richard Oliver & Co.; Bankers and Brokers, with 



''FAKE" TRADE JOURNALS 215 

offices in the Chicago Stock Exchange Building, at^ords investors 
special advantages well worth the consideration of all persons who 
are seeking these markets as a means of adding to their incomes. 

The unique feature worthy of note in their system of dealing in 
stocks and commodities is that it is comprehensible by the ordinary 
'mind, and appeals to the common sense and judgment. The firm 
have well named their method the " safety valve plan of invest- 
ment." It is entirely distinct from speculation, and is free from 
hazardous chances. 

The success of the firm is largely based on keeping their patrons 
on the safe side of the markets. In all cases they advise against 
taking unwarranted and gambling chances^ and put absolutely 
safety and reasonable profits above all. Their record shows the 
wisdom of their methods. 

Richard Oliver & Co. have no source of income except the com- 
missions from the trades with which their customers entrust them. 
They can gain nothing from their customer's loss, but on the other 
hand his success is to their interest, because it tends to increase their 
business not only from him, but from his friends to whom he will 
naturally recommend the firm. 

The responsibility of the firm is beyond question, and this is a 
point on which the investor ought to be assured. The solvency of 
the house to wdiich money is entrusted is of vital importance. It has 
often happened that customers have been successful in a series of 
operations only to find that the broker with w^hom they have placed 
their accounts has involved himself in speculations that made it im- 
possible for him to pay, and thus they lost both their capital and 
profits. This cannot happen with the broker who depends on his 
commissions for his compensation. 

One of the peculiarities of Richard Oliver & Co., is that they 
want their customers to understand the system on which they trans- 
act business, and spare no pains to inform them fully. Their book- 
let entitled '' Modern Methods of Safe Investment," is a gem in its 
way, and is furnished to intending investors on application. It 
gives the methods on which the firm conducts operations in com- 
plete detail, and makes clear the principles of successful trading. 
Anyone after reading this pamphlet wnll have a full understanding 
of the manner in which his capital will be invested if he entrusts his 
business to this firm. They also issue a " Special Letter of Advice," 
which will be mailed regularly to those interested in speculation. 

There w^ere never better opportunities for profitable trading in 
stocks, grain and provisions, than now. By the system of Richard 



216 GOLD BRICKS OF SPECULATION 

Oliver & Co., profits of from $500 to $1,000 can be made in thirty 
days on an investment of $100. The firm do not recommend that 
investments of less than this sum be made in purchases on margins, 
as they make only the most conservative deals, with ample margins 
so that customers may not be frozen out on sharp fluctuations. 
They execute orders both on margins and for cash. 

The information bureau of this firm has been established and is 
maintained at a large annual cost. By it the completest and earliest 
advices from the most reliable sources are obtained of all market 
movements. The firm have private wires to all exchanges over 
which to obtain original and exclusive information. This enables 
them to give their customers the benefits of a full and comprehensive 
knowledge of the markets. 

We feel that we cannot give intending investors better advice 
than by recommending them to correspond with this firm, and obtain 
full information regarding their methods of conducting business. 
Customers at a distance receive the same careful attention to their 
orders as those in the city. Notices are mailed them or telegraphed 
if ordered, as soon as their orders are executed, and full instruc- 
tions are given as to the manner of placing orders and sending 
directions to buy and sell. 

The responsibility and solvency of Richard Oliver & Co. are be- 
yond all question. The firm will give references on these points to 
all who ask for them. Every one who trades or expects to trade in 
stocks or commodities should have the booklet issued by this firm. 
It can be obtained by writing for it. 

The offices of the firm are provided with all conveniences for 
customers, and all news of financial matters and market quotations 
can be obtained there. 

I have in my possession dozens of equally vicious pub- 
lications containing '' write-ups " on hundreds of fraudu- 
lent concerns, all couched in as complimentary terms as 
the Oliver article and all intended to mislead the would-be 
speculator or investor. 

Where did the money come from? Advertising, ofifice 
rent and help, printing, postage, telegrams and '' Trade 
Journals" all cost money! The ''Safety Valve" un- 
doubtedly provided the funds by not working in, the in- 



"'FAKE'' TRADE JOURNALS 217 

terests of " the investors." As in the case of the Missis- 
sippi steamboat of ante-belkini days — " there was a nigger 
on the safety valve:" 

It has been my pohcy to arouse the authorities to action, 
if possible, whenever I have been satisfied that an individual 
or combination of individuals were perpetrating a fraud 
upon the public. 

Complaints from persons who had been defrauded by 
Oliver became numerous. They were divided up among 
the Postoffice Department, the police and myself. By 
getting them all together and demonstrating the uniformity 
of his methods in about a dozen cases, I brought about his 
arrest by the Postoffice Department. At the same time 
the police were preparing to raid and close his office ; but, 
not wishing to interfere with the prosecution by the Postal 
officers, they abandoned the case w^hen the Federal author- 
ities arrested him. 

On May 22, 1903, Oliver was arrested on the com- 
plaint of Postoffice Inspector Ketcham on the charge of 
" using the United States mails to further a scheme to de- 
fraud." After hearing the evidence of victims from Mis- 
souri, Indiana, Colorado, Iowa, Minnesota and Illinois, 
United States Commissioner Humphrey, on July i. 1903, 
held Oliver to the Federal grand jury to answer the charge 
named in the complaint. 

Oliver's office was closed and a " For Rent " sign took 
the place formerly occupied by his gaudy announcement 
that he was a " Banker and Broker." 



^18 GOLD BRICKS OF SPECULATION 



CHAPTER 11. 

THE "booklet.' 



To THE People of St. Louis 

THIS ARTICLE IS SPECIALLY DEDICATED, WITH 
THE HOPE THAT IT MAY BE READ .AND ACCEPTED 
AS THE HONEST EXPOSITION OF THE METHODS OF 
SOME OF THE VAST COLONY OF SWINDLERS, WHO 
ARE BLACKENING THEIR CITY's CHARACTER, ON 
THE EVE OF ITS INVITATION TO THE WORLD TO 
ENTER ITS GATES AND WITNESS THE GLORIES OF 
THE LOUISIANA PURCHASE EXPOSITION. 



The bucketshop and *' get-rich-quick " brokers' Httle book, which 
explains how to make money; when dissected by an expert, its 
plausible statements are shown to be absurd falsehoods ; the 
career of a St. Louis booklet. 

Section L 

The " Booklet " is the bucketshop and " get rich- 
quick " broker's strong card. Containing, as it does, all 
the rules and methods of " getting there," the reader after 
a study of its pages feels as though it's " so easy " that he 
would be akin to a thief if he took advantage of the gener- 
osity of the publisher of the " Booklet." 

I have two booklets " convenient for mailing." Both 
were published in St. Louis and bear the same title : '' How 
a Modest Fortune May be Made From a Small Invest- 
ment/' The later edition bears upon the cover, in addition 
to the title, the very significant legend : "' Golden Gain 



THE ''BOOKLET'' 219 

From Golden Grain." Evidently this was an afterthought, 
or the first jDubHsher, who, by the way, was succeeded in 
business by the second pubhsher, was not positive about 
the '' Golden Gain " until he had tried to make it from the 
" Golden Grain." But, having tried and succeeded, he 
quickly organized a new '' corporation " with the same 
president. The change was not explained; nor was the 
new corporation referred to as the successor to the old one. 
Why ? It is possible that the '' Golden Gain from Golden 
Grain " had something to do with this apparent '' dropping 
out of sight '' of the first concern. 

The following paragraph from a letter received from 
Connecticut in September, 1902, by a Chicago commission 
house may explain who gets the ** Golden Gain from Golden 
Grain," and suggests another line to the motto: 

** We've changed our name, 
Which is part of the game." 

This is what a man in Connecticut says: 

'' I sent some funds to a firm in St. Louis a few weeks since 
to buy corn on their judgment. They bought and in a few days 
informed me they had doubled it besides their commission and 
bought again with all the funds. In a few days they wrote me 
grain had dropped and the funds had vanished. They operated on 
a 2-cent margin." 

I find in my possession some correspondence which 
shows that during July and August (1902) the first con- 
cern was working, but suddenly dropped from view, and 
that the new one blossomed out about September ist 
(1902) with the motto: ''Golden Gain from Golden 
Grain." 

The introductory is the same in both booklets and is 
designed to put the reader under lifelong obligations to 
the officers of the corporation, who not only '' respectfully 



220 GOLD BRICKS OF SPECULATION 

dedicate this little booklet " to the intelligent and '' am- 
bitious " reader, but also suggest " tremendous profits 
within sixty days." The opening and closing paragraphs 
of the introductory are as follows : 

'' To those who are properly ambitious and desire to secure a 
fair proportion of the country's wealth by legitimate business meth- 
ods, who will reason and think for themselves, this Httle booklet is 
respectfully dedicated 

" A careful perusal of the following pages will convince you, we 
believe, that our views are logical and conservative, and that an in- 
vestment made along the lines we suggest, will produce for you tre- 
mendous profits within the next sixty days." 

Following the introductory, the first booklet plunges 
into " Sworn Statements " with an absolute disregard for 
the Sabbath Day, which can be explained only by the the- 
ory that there was no calendar handy when their " dum- 
my " swore that on March 23RD, 1902 (Sunday), he de- 
posited WITH THEM $25, and that "" on the same date 
THEY bought FOR HIM i,ooo BUSHELS OF CORN," and, after 
recounting various " successful operations," '' showing a 

TOTAL NET PROFIT OF $303.10 IN TWENTY-EIGHT DAYS, ON 

AN INVESTMENT OF $25.00," they again " work in " the 
Sabbath, by having him subscribe to this statement April 
13, 1902 (Sunday), just twenty-one days after the orig- 
inal " Sunday " transaction. If this is not desecrating 
the Sabbath with a vengeance, they should have another 
try. After relating in another " sworn statement " by *' a 
member of the firm " how they made $5,850 in sixty days 
for a " client of the firm " on an investment of $100 (this 
was a week-day deal), they say: 

" The foregoing affidavits represent but two of the great number 
of our customers who have made enormous gains on their invest- 
ment through us in corn within the past year.*' 




Kodest 
fortune 

ron\ 

A 



yrom. 
o/det\ rt>.irC 



Cover of the "Golden Gain from Golden Grain" Booklet. 



THE ''BOOKLET" 221 

Then follows a literary gem, entitled "" A Study of Con- 
ditions," devoted exclusively to corn, which " is sure to sell 
at one dollar per bushel." Then there is a chapter on 
'' Tlie Advantage of Buying Corn Futures" The whole 
burden of this chapter is, '' You send your money to us and 
we will do the rest." Here (abridged) are a few of the 
inducements : 

We will handle your investment. 

We will make your trades. 

We will give your interest the same care we do our own._ 

We do this without commission except a small share of the 
profits we are able to make for vou. In this way your INTER- 
ESTS are our INTERESTS. 

To make money for ourselves we must make money for you. 

No profit for you, no commission for us. 

We will buy corn for you on a margin of 2c per bushel. In fact, 
we will buy corn for you on a margin as small as ic per bushel. 

We will accept one-tenth of the profits in lieu of commissions. 

Your money, principal and profits, subject to your withdrawal at 
any time. 

We will receive as low as $25 as an investment. 

Frequent references are made to the '' sworn state- 
ments given in the earlier pages of this booklet," and after 
carrying the mind of the reader back to the '' enormous 
profits," the author says : " What we have done for others 
we believe w^e can do for you." Now, if he had said, '' We 
have ' done ' others and we believe we can ' do ' you," it 
could not read plainer to a person accustomed to trading 
methods. In fact, any broker or trader of experience could 
read between the lines of this httle '' booklet " : "' Send us 

YOUR MONEY AND WE WILL NOTIFY YOU PROMPTLY THAT IT 
HAS BEEN LOST, FOR EVERY DOLLAR YOU LOSE, WE KEEP." 

After referring to their successful and numerous cus- 
tomers and the thousands of dollars they have spent gath- 
ering data for them, assuring all that their interests will 



222 GOLD BRICKS OF SPECULATION 

be carefully watched, the booklet closes with : '' Write 
or telegraph us to close your account, and, if you desire, we 
will send you the amount due you within an hour by tele- 
graph, or mail draft to you on receipt of your request." 

The inside page of the front cover is devoted to the 
title and address of the corporation and the names of the 
officers. " Special References," in which several St. Louis 
banks are named as '' Bankers," giving the inference that 
the concern banks its funds in the institutions named. 

This booklet was printed and distributed early in July, 
1902. It v/as evidently a success from the standpoint of 
the company issuing it. Having accomplished its purpose, 
the corporation changed its name (a feat peculiar to 
bucketshops), and on September ist inaugurated a new 
campaign. The prestige (?) of the old company appeared 
to be of no value (another peculiarity of " fly-by-night " 
bucketshops), and the new company started in by appro- 
priating everything except the name and the victims of the 
old one. The " little booklet " is reproduced, with some 
additions and revisions such as photographic " views of 
our general offices " — which have now grown to nine rooms 
— but the basest ingratitude is displayed. The '' little book- 
let " nowhere mentions its original and enterprising owner; 
in fact, it cuts the first corporation even to the extent of 
revising the affidavits so as to dispense with its name. The 
incriminating Sunday deal is appropriated by the new 
concern with the rest, and it makes much of this *' stolen 
thunder," even though it is stage thunder. 

The revised edition is a gem. Three plump ears of yel- 
low corn, a spray of golden rod and the " golden gain " 
motto are added to the original title page. Then follows 
the introductory already quoted from. On the reverse of 
the introductory page the reader finds two 2x2^ photo- 



THE -BOOKLET'' 223 

graphic views — one of the " President's Private Office," 
the other of the " Private Wire and Board Room." Ju- 
diciously scattered through this volume are views of vari- 
ous offices and departments. One department, being be- 
yond the capacity of the camera, is taken in sections, the 
southwest and northwest corners being showai, but noth- 
ine is said about the southeast or northeast corners. 
Probably they are reserved for the third edition of the 
booklet. 

Unlike the first edition, the revised booklet spares you 
the shock of plunging suddenly into the '' sworn state- 
ments." Three pages are devoted to preparing you for 
the affidavits (revised so as to destroy their connection 
with the dead company) showing $5,850 profit from $100 
and $303.10 from $25. This is the way you are gradually 
led up to the enormous-profit bait : 



" Can you make $5,850 in two months? If so, stop right here, 
for this terse tale is not meant for you. Otherwise other- 
wise " 

" Let's invest $100 and see what happens, for you must invest to 
make money " 

*' Real estate would be a pretty good investment if you could get 
in on the ground floor on any active market, but $100 won't buy 
very many city lots or country plots, and $100 won't buy much of a 
stock for a store " 

" Fortunes are made between dawn and dark by those who 
know and .... act quickly. He who hesitates is lost " 

" Of course, there are foolhardy speculations just as there are 
rash business ventures, but you take no unusual business chances if 
you use usual business judgment. 

'' With $100 as a beginning, $5,000 or $50,000 profits can be 
made if you get in on the right thing. . . .at the right time. . . .with 
the right kind of brains behind it. There isn't any guess work or 
theory or supposition about this, just hard, cold-blooded facts — here 
they are " 

Then the reader reaches the sworn statements. But 



224 GOLD BRICKS OF SPECULATION 

should he not be convinced, he will certainly waver when 
he reaches the closing argument couched in convincing 
language : 

" You can't dodge these firm facts. The experience of these 
men is simply evidence of what we have done. And isn't it logical 
to conclude that what we have done for others we ought to be able 
to do for you, and do it in corn, too?" 

Nothing except the " sucker " that iMtes could l)e more 
simple. 

Then follows page after page of frantic effort to induce 
the reader to buy corn on a 2c margin. Every conceiv- 
able inducement is held out with misrepresentations of the 
vilest character, even to misstatements of past values. In 
fact, so barefaced and contemptible is the scheme that the 
'' hold-up " man with a mask and piece of lead pipe, w^aiting 
in a dark alley for his victim, is a saint compared to the 
rascals who conceived and put into execution this ignoble 
method to rob the innocent, without risking physical pun- 
ishment. A study of their literature and methods by an 
expert w^ould result in the following conclusions: 

1st — It is a scheme to defraud. 

2nd — None of the inducements offered is bona fide. 

3rd — The methods said to be used to make profits are 
impossible of execution. 

4th — The arguments are false and framed solely with 
intent to deceive. 

5th — Every dollar sent the concern will be stolen by its 
officers. 

6th — The aim of the promoters of this scheme is to 
steal small sums ; they are petty thieves. 

7th — Total depravity, disregard for the truth and des- 
perate villainy are displayed in every page of this little 
booklet. 



THE -BOOKLET'' 225 

Here is a fair example of the lying statements: 

" Corn is bound to boom. It will reach higher prices than it 
ever has within the last twenty years, and during these two decades 
the $1 mark has been reached more than once or twice. In 1892, 
with a crop amounting to one billion and six hundred milUon 
bushels, or four hundred million bushels more than last year's crop, 
corn reached $1.48 per bushel " 

The facts are that corn has not sold above $i a bushel 
since 1868. It touched $1 once in 1892, in the attempt of 
Coster & Martin to corner the market, but within an hour 
broke off to 48>4c. 

One of the most interesting parts of the expose is still 
to come. In order to inspire confidence and make it easy 
for the " sucker " to part with his money, references are 
never overlooked by the accomplished confidence operator. 
Our friends of the '' little booklet " were not lacking in 
this important adjunct to a well-regulated swindle, as they 
furnished four '' Special References," and I have before 
me their answers to my inquiries. A '' special reference ". 
is a new departure in this particular line of frauds, and I 
confess that it was with a good deal of curiosity that I 
opened the answers to my inquiries. Here they are, a 
quartet of really ''special'' (and specially interesting) 
'' REFERENCES." The first " special '' is their printer, who 
speaks of them as follows: 

St. Louis, Oct. 2y, 1902. 



Dear Sir : 

We have your favor of the 24th inst., asking for information re- 
garding the of this city. Our relation with this 

corporation has been that of creditor only. We have sold them 
great quantities of printing and are pleased to say that they have 
always discounted their bills. Yours truly, 



Secretary. 



226 GOLD BRICKS OF SPECULATION 

The second is from the advertising company honored 
with their patronage and rmis thus : 

St. Louis, Oct. 27, 1902. 



Dear Sir: 

Your favor of the 24th, regarding the re- 
ceived. We have done business amounting up into the thousands 
of dollars with this firm, and have always found them very prompt 
in the meeting of their obligations. The local reputation of this 
firm, as well as that of the officers, is such that we are positive they 
will carry out any contract into which they enter. 
Respectfully yours, 



The third comes from a chemical company. It is brief, 
and evidently the writer was not under business obliga- 
tions to the concern, for he makes the following notation 
on the inquiry and returns it: 

" Our information is that they are reliable and meet all their ob- 
ligations promptly." 

The fourth, however, is calculated to set all your fears 
at rest and dispel suspicion, for it is a report from a '' real 
live " mercantile agency. Just think of it ! And in addi- 
tion to a formal report the mercantile agency writes a 
letter acknowledging receipt of the inquiry, but makes a 
fatal admission when it adds : 

" ARRANGEMENTS HAVE BEEN MADE WITH US BY 
THIS COMPANY TO FURNISH REPORTS ON THEM 
FREE OF COST TO THE INQUIRERS." 

Strange, but true, however, these four '' special refer- 
ences " were also the '' special references '' of the defunct 
company. Yet they all fail even to mention it. 

Stranger still, the mercantile agency, while reporting 
this company as having been incorporated September 5, 



THE ''BOOKLET'' 227 

1902, and going into details as to its officers, neglects even 
to mention the fact that the president was formerly presi- 
dent of the defunct concern. But an alleged mercantile 
agency that " furnishes reports free " could hardly be ex- 
pected to go into details that might be unpleasant, when 
they are used as a '' Special Reference " by a despicable 
gang of thieves, masquerading as brokers or commission 
merchants. But this is one of those " quick action " 
schemes which permits of no delay. As soon as enough 
money is received, or victims become troublesome, or Uncle 
Sam begins to investigate through the postoffxe inspec- 
tors, the doors will close. Therefore every facility must 
be provided at the outset to make a '' quick turn," and a 
friendly '' mercantile agency " report is necessary to in- 
spire confidence and prevent delay on the part of the victim. 

Every well-regulated " get-rich-quick " bucketshop has 
a '' press agent," and the St. Louis concern is no exception. 
In fact, at the moment it excels many of its predecessors 
and all of its competitors in acquiring a " prince of fakers " 
to produce literature for the gullible. Its newspaper adver- 
tisements show absolute disregard for expense, as well as 
for the truth. More than half a page of a Chicago Sun- 
day newspaper (costing not less than $500) was recently 
devoted to advertising this '' fake " in the form of a 
"write-up" headed: ''Wonderful Gains Made by 
Small Investors." 

This deceptive article, which was really a paid adver- 
tisement printed in the form of a newspaper story by the 
'' reputable " Chicago paper, filled four columns of ordi- 
nary type. After throwing " bouquets " at the president 
and printing an interview with him (which was simply 
a reproduction of the little booklet), two columns were 
then devoted to the displaying of thirteen testimonials, 



228 GOLD BRICKS OF SPECULATION 

every one of which referred to transactions made prior to 
the birth of this " great enterprise." 

Pages could be written in denunciation of this class of 
rascals without doing full justice to the subject, but the 
.public would not read it with the interest it shows perusing 
the '' fake ads " which promise something for nothing. 
The lives of these concerns are short. They reach the 
public through the mails and advertisements in newspa- 
pers; they inspire confidence by their boldness, their special 
references and their ability to buy advertising space in so- 
called reputable newspapers. The poor and inexperienced 
send them their mites which are often the fruits of years 
of toil. A report of a profit on the first deal is made ; then, 
as with the Connecticut man, they notify the victim, with 
their regrets, that all is lost. There seems to be no end 
of this villainy. It goes on year after year on a similar 
plan to the one just discussed. This concern no doubt will 
have fulfilled its mission and the '' Golden Gain from 
Golden Grain " will be in the cofTers of the swindlers in 
St. Louis before this article can be published. Btit other 
equally impossible schemes will attract money from the 
'' suckers," so there is no danger of a dearth of this kind of 
thing. 

Section II. 

Stirring events crowd each other in the life of a swin- 
dler. When I completed the article on the " Booklet " I 
assumed that thirty or sixty days would elapse before the 
evidence of a victim would be available; but I failed to 
take into consideration the despatch with which this par- 
ticular ■' slaughter house " disposed of " lambs." 

On November 15, 1902, I wrote the Booklet article, 
and now, just one week later, November 22, I am in pos- 



THE "BOOKLET" 229 

session of the documents, proving absolutely that the char- 
acter and methods of this concern are exactly as I painted 
them in the article. 

Recently a gentleman was introduced to me by a com- 
mon friend. It did not take the stranger long to explain 
why he desired to meet me. Nor did I hesitate to inform 
him that he had been swindled. He was a victim of the 
" Golden Gain from Golden Grain " booklet, and it is evi- 
dent that there are thousands of them ere this, for they 
dispose of them quickly in St. Louis. Here is the chro- 
nology of the particular deal which I have before me at 
this moment : 

October 15, 1902. $100 mailed by victim to '' fakers." 

October 16, 1902. The " fakers " report 5,000 December corn 
bought for victim. 

October 20, 1902. " Fakers " report 5,000 bushels corn sold at 
profit $125. 

October 21, 1902. The " fakers " report loss of all funds, $100 

and $125, total, $225. Market broke. 

The victim had lost his money the moment he placed 
it in the mails addressed to the swindlers. Like the cat 
with the mouse, the '' faker " plays with the victim, but 
never gives him an opportunity to get away. For a moment 
he leads him to believe that he has made some money, only 
to snatch it cruelly from him the next. 

How IT Was Done. 

St. Louis, October 16, 1902. 
Dear Sir : 

We have your favor of the 15th, enclosing remittance for 
$100, with which we purchased for you 5,000 bushels of December 
corn at 50^ cents per bushel, on basis of 2 cents margin, your ac- 
count to be handled on our judgment, we to exercise our best ability 
in buying, selling or re-investing until same is closed. * * * 



230 GOLD BRICKS OF SPECULATION 

St. Louis, October i8, 1902. 
SPECIAL— TELEGRAPH EARLY. 
* * * Under these conditions we are holding on to your corn 
and advise you strongly to double up and buy as much as your pres- 
ent holdings, or twice the amount, on Monday's market. Telegraph 
us your order as early as possible after receipt of this letter, so as to 
reach us early Monday morning. Get all your friends to buy De- 
cember corn ; it still presents the greatest possibility of profit, in our 
opinion, of any investment in America to-day. Be sure to telegraph 
your order early. 

Very respectfully yours, 

St. Louis, Oct. 20, 1902. 
Dear Sir : 

We take great pleasure in informing you that we to-day dis^ 
posed of your holdings m December corn at top price, 53^ cents per 
bushel. About one hour later market reacted to 52^ cents, but im- 
mediately started to advance rapidly, and we at once made an 
investment for you at 53^^ cents, increasing your holdings and pro- 
tecting same with a margin of 2 cents per bushel. ''' * * 

St. Louis, October 21, 1902. 
Dear Sir: 

On Saturday last, December corn sold and closed at practically 
the highest point on the crop, with every indication that it would 
pass 55 cents and possibly reach 60 cents this week. 

The predictions were for very bad weather Saturday and Sun- 
day over the entire corn belt, but instead of bad weather we have 
had most beautiful weather conditions over the entire country for 
three days. This, together with largely increased receipts, induced 
heavy selling yesterday and to-day; and while the market held 
strong during the early session yesterday morning, later in the day 
it broke severely, and this was followed by a decline early to-day, 
carrying the market down to S^V^- -^s this was below the exhaust 
price on your December holdings, and as we had no instructions 
from you to protect your corn below this price, and had no further 
margins in hand, we were forced to sell your corn at exhaust price 
to protect us against further loss. However, we consider this break 
only temporary, and cannot too strongly urge you to telegraph us 
immediately on receipt of this letter to replace your December corn, 
so, in our opinion, the advance following this break will be sharp 
and carry corn higher than it has yet sold. 



THE ''BOOKLET" 231 

We had a tip later that Armour was the power that was break- 
ing the corn to shake out the " tailers." You can well understand 
that in a deal of the magnitude of this one they do not want this ele- 
ment following them. They have absolute and entire control of the 
situation, and we are fully convinced that they will force the price 
of December corn to 75 cents before the first of the year. That is 
reason why we think you should allow us to replace your December 
corn at once. Telegraph to avoid delay. 

Very respectfully yours, 



Secretary. 

This might be said to be '' getting quick action for your 
money.'' 

But let us analyze the scheme. The business was all 
done by mail, which gave the swindlers the advantage of 
being able to use the market quotations of each day after 
the close of the market. The victim's $100 was received 
and he was informed that a trade had been made for him. 
No trade was in fact made; but an unusually imposing 
notification called a " confirmation " was mailed to the 
victim. These first pretended trades were '' prepared " 
after the market closed — they were the '' dope " intended 
to exhilarate him, and looked like a good thing, being re- 
ported at prices that usually showed a profit at the close of 
the first day. If the market advanced the victim supposed 
he was making money (in the case at hand the market 
advanced 2^^c per bushel). Then drastic measures were 
adopted by the " faker." After the close of tlie market he 
'' prepared " another set of trades, as shown by the letter 
of October 20th, reporting " with pleasure " the original 
transaction closed at top prices, and a re-investment made ; 
but, at the close the reinvestment showed a loss of $93.75, 
being made at 53 ^c, while the market closed at 51^. So 
that the victim had not much of this profit left. But to 



232 GOLD BRICKS OP SPECULATION 

guard against accidents the " faker " adopted a beautifully 
original scheme; — note the following from letter of 20th 
quoted above. 

"AND WE AT ONCE MADE AN INVESTMENT FOR 
YOU AT 53/8 CENTS, INCREASING YOUR HOLDINGS 
AND PROTECTING SAME .WITH A MARGIN OF 2c PER 
BUSHEL." 

They do not say how much they have increased them, 
but in this case the victim received a " confirmation/' show- 
ing a purchase of 5,000 bushels of December corn at 53)^, 
exactly the amount of the original holdings. Why this 
discrepancy? Are the holdings increased or not? That 
is easily answered. If tlie market goes u]) the victim would 
make money, so his " holdings " would l)e 5,000 bushels, 
1)ut if the market declines, so as to lose him money, he will 
have " increased his holdings " sufficiently to enable the 
" fakers " to report the money lost on a small decline. In 
this case the victim had, as he supposed, 5,000 bushels De- 
cember corn 1)ought at 53^8^ and a l)alance of $225 (4V^c 
l)er bushel) in the " faker's " hands. This would carry the 
trade down to 4834c, but the " faker," anxious to " freeze 
out " the victim, works the " increased holdings " in and 
notifies him that '' we were foi^ceij to sell your corn at 

ICXIIAUST PRICJ^: TO PR0Ti:CT US AGAINST FURTHER LOSS." 

Naturally the victim complained, as he had sufficient mar- 
gins to carry the deal, as he understood it, i^c below the 
low price of the day on which the trade was reported closed 
for lack of margins. He was tlien informed that he had 
11,250 bushels of December corn. 

Thus in six days the $100 was transferred from the 
gentleman in Wisconsin to the swindlers in St. Louis by 
a little juggling and a pretense of trading, — a disgrace to 



THE ''BOOKLET" 233 

a civilized community, and a reflection on our government 
and those entrusted with the enforcement of the law. 

I submitted this case to the postoffice authorities on 
November 22, 1902, and the developments are shown in 
the succeeding section. 

Section ITL 

On Novem])er 29, 1902, Hugh C. Dennis, Thomas W. 
Garland and Charles H. Brooks were arrested b}^ United 
States deputy marshals at St. Louis on a capias issued 1)y 
Judge Elmer B. Adams of the Federal District Court. The 
issuing of the capias followed the returning of indictments 
by the Federal grand jury, charging each of them with 
using the mails in furtherance of a scheme to defraud. 

They were taken at once by the marshal before Judge 
Adams for arraignment. They pleaded not guilty, and 
the court fixed January 6, 1903, as the date of their trials. 
The indictments found by the grand jury resulted from 
evidence presented to that body by Chief Postoffice In- 
spector Dice regarding the operations of the defunct 
Brooks Commission Co. 

Mr. Dice and Inspectors Sullivan and Price, who w^ere 
associated w4th him in the investigation, said that the 
Brooks Commission Co. was organized by Brooks and con- 
ducted by him individually for some time. In May, 1902, 
however, they said he sold out his interest to Messrs. Den- 
nis and Garland, who continued for a time to conduct the 
business under the same title. In June, or thereabouts, it 
appears that the Brooks Commission Co. ceased to do busi- 
ness. 

Brooks had resided in St. Louis since retiring from 
the company, but had been engaged in other pursuits. He 
was then connected with the National Security Co., the 



234 GOLD BRICKS OF SPECULATION 

offices of which were on the third floor of the Equitable 
building. Mr. Garland was in the cloak business on Broad- 
way and Mr. Dennis was president of the Rialto Grain 
and Security Co. in the Rialto building. 

It will be noted that the arrest was on the complaint 
of fraud connected with the original publishers of the book- 
let and not for an act committed by the second corpora- 
tion. The scheme in both cases, however, was identical, 
and the change in name was simply a subterfuge. 

The story of the trial and the discharge of Dennis on a 
technicality, as published by the St. Louis Republic of 
January 21, 1903, was, in part, as follows: 

" The jury in the case of Hugh C. Dennis and Thomas W. Gar- 
land, indicted on a charge of using the mails in a scheme to de- 
fraud, returned a verdict of acquittal yesterday in the United States 
District Court, on instruction by Judge Elmer B. Adams. This in- 
struction was given at the conclusion of the case, on a demurrer 
filed by defendants' attorneys. 

" The demurrer alleged that the proof offered by the government 
was at variance with the charges in the indictment. , 

'' Judge Adams, in sustaining the demurrer, said : 

*' * Gentlemen of the jury, it is with regret that I instruct you to 
return a verdict of acquittal against this defendant Dennis. This 
man ought to be in the penitentiary. The evidence introduced here 
by the Government, and conceded by the defendant to be true, shows 
that he has violated the laws of the State and committed an offense 
which entitles him to a term in the penitentiary. 

" ' On the evidence submitted the Federal courts have no juris- 
diction in this case, but it is clearly a case for the State authorities 
to deal with. If the community desires redress for the acts com- 
plained of against this defendant, the attention of the State authori- 
ties should be brought to them in such a manner that official cog- 
nizance could be taken of them and prosecution be begun.' 

'' In this strain Judge Adams continued for ten minutes, during 
which the large audience hung upon his words with intense inter- 
est. Although the judge delivered his remarks in a calm and dis- 
passionate voice, they created a most profound impression upon the 
large audience, composed largely of brokers and business men. 



THE "BOOKLET" "2,^0 

*' After court had adjourned, Judge Adams said : ' Owing to 
the fatal variance between the proof ofifered by the Government 
and the allegations in the indictment, there was no recourse but to 
sustain the demurrer of the defense, and instruct for an acquittal. 
The Government charges that the defendant had devised a scheme to 
defraud by holding out that he was engaged in a legitimate broker- 
age business, buying, selling and delivering grain, and soliciting 
money from investors for that purpose. It appeared on trial, how- 
ever, that the Government had established another thing entirely. 
The scheme of the defendant as established by witnesses and as 
conceded by defendant, was not to engage in a legitimate business 
of purchasing, selling and delivering grain, but to gamble on the 
fluctuations of the grain market. 

'' ' It was a bucketshop scheme, established for the distinct pur- 
pose of gambling on the changes of the market price of grain. The 
defendant openly held out such purposes and prospects, and the 
patrons wdio responded to its solicitations did so knowingly and in 
furtherance of such purpose of gambling. Thus they were not en- 
titled to any remedy or redress under the Federal statutes. The 
business is a distinct and open violation of the state laws against 
gambling, and the proper remedy lies with the State authorities, if 
the community desires to suppress such schemes or punish men en- 
gaged in violating the State laws.' " 

The crash in '' get-rich-quick " circles at St. Louis in 
February, 1903, led to the appointment of a Senate (State) 
investigating committee, which on March 3rd filed a re- 
port of twenty-one printed pages. Among the concerns 
investigated were the two companies which had issued the 
'' Booklet" referred to in this article: the Brooks Grain 
Brokerage & Commission Co. and the Rialto Grain 
AND Securities Company. 

The following is a copy of that portion of the report 
directly treating of these concerns : 

THIRD CLASS GRAIN COMPANIES. 
Under this head may be classified the Brooks Grain Brokerage 
& Commission Company, the Merchants' Brokerage & Commission 
Company and the Rialto Grain & Commission Company. The evi- 
dence discloses that the methods of these companies often border on 



2SG GOLD BRICKS OF SPECULATION 

the criminal process of obtaining money under false pretense, yet 
hedged about by a contract which seeks to relieve them of this un- 
lawful appropriation of a customer's money. The evidence further 
discloses that the methods of some of these companies is to advertise 
their business in glaring type in the metropolitan newspapers, and 
should a party deposit money with them supposedly for the purpose 
of buying grain, he is sent a letter in a few days notifying him of 
his profit, which is enormous in con.iparison with his investment. 
This letter is then followed by another notice of profits, and so con- 
tinued until the party calls for his profits, when he is written a let- 
ter, commonly called an " exhaust letter," notifying him that there 
has been a " slump " in the market and that unfortunately his 
money and profits are all lost. 

The methods of these companies are expressed by the testimony 
of one William Ewing Love, a witness who has been an employe of 
the Brooks and the Rialto companies, and who was the printer who 
had in charge and printed what is called " exhaust letters," and who 
testified that the firm would take people's money, place the same in 
their own bank accounts, never purchasing nor attempting to pur- 
chase grain or futures. The following are excerpts from his state- 
ment and speak for themselves : 

" They have magnificent offices — nearly an entire floor in a great 
ii-story office building. Everything is conducted on a glittering 
scale of gold and glamour, but they are thieves of the most danger- 
ous and most debased character. They are ostensibly grain and 
stock commission men, but in reality they receive the money of the 
investors from all sections and never invest it, but put it in their 
own bank account and at once put in operation a series of maneuvers 
to retain possession of every cent. They pay out just sufficient 
profits to act as advertisements in dififerent sections of the country. 
All other money forwarded to them is clear gain. They bank at 
least $50,000 a week. It is a new swindling operation, so far as 1 
can learn, though it might have been operated elsewhere. The ' ex- 
haust letters ' were so numerous that it was necessary to have two 
printing presses to run them ofif, but the letters notifying investors 
of gains were all handled by private stenographers, and the ' exhaust 
letters ' were far more numerous than the letters notifying the in- 
vestors of winnings. In truth, the proportion of ratio between these 
two classes of letters showed so wide a diversion there could be but 
little comparison. They sometimes sent out what is called ' confirm- 
atory letters,' notifying customers that they had won, but also noti- 
fying them that their winnings, as well as the original capital, had 



THE ''BOOKLET'' 237 

been reinvested and enclosing a ' confirmatory ' to be signed by the 
dupe, empowering the concern to carry out this second deal. The 
majority of the recipients of such letters, under the flush of having 
won, and influenced by oily arguments in favor of reinvestment, at 
once signed and returned the ' confirmatory,' thus bidding an uncon- 
scious goodbye to their money." 

Conclusion. 

The final chapter in the life story of all these fake con- 
cerns is about the same. The end of the concerns promoted 
Iw the publishers of the " Golden Gain from Golden Grain " 
booklet, is a fair example. Here it is, clipped from the 
Chicago Record-Herald of August 12, 1903: 

St. Louis, Aug. 11. — Elaborate office fixtures, handsome 
grained furniture and other expensive furnishings of the Rialto 
Grain and Securities Company's sumptuous apartments in the Rialto 
P>uilding, Fourth and Olive streets, w^ere seized this afternoon and 
held under a writ of attachment sworn to by Jay Tuttle, who claims 
that the Rialto company owes him $1,850.80, which he has been 
unable to collect. Tuttle, who is said to be a physician of Butte, 
Montana, claims that since the investment of his money with the 
company he has received no returns. Attorney T. B. Harlan, rep- 
resenting the company, says its resources amount to $70,000 and 
that claims filed against the company aggregate $15,000, all of 
wdiich have been paid. President Hugh C. Dennis and Secretary 
]\lahaney, of the company, are out of the city. 



238 GOLD BRICKS OF SPECULATION 



CHAPTER III. 

THE "sucker" list. 

How persons, who, by answering the " faker's " advertisement and 
thereby indicating a desire to " invest,'' become objects of in- 
terest ; their names and addresses constitute a list, vaUiable for 
its possibiHties. 

Every well-equipped fraudulent concern acquires as 
rapidly as possible the names and addresses of susceptible 
persons, and the care and the revisions of the lists made 
up of these names and addresses form an important part 
of the labor of the principals or employes. The lists grow, 
as each advertisement brings out inquiries from persons, 
who, either through curiosity or a desire to " invest," write 
for particulars. Affiliated swindles and those operated in 
succession by a gang of '' fakers " use the same hst of 
'' suckers," as they term the prospective victims. 

In the case of affihated swindles, if the " sucker " does 
not succumb and send his money in on the strength of the 
inducements offered by one concern,- his name is trans- 
ferred to the Hst of another of the schemes operated by the 
same parties and he is bombarded with its literature for a 
time. Thus a man must pass through the ordeal of having 
dozens of tempting offers made him before he demon- 
strates that he is not a '' sucker," or has not got the money, 
when his name is stricken from the Hst. 

The " sucker " who parts with his money and has been 
notified that '' through an unexpected change in the mar- 
ket it has been lost " will rarely send a second remittance 
to the same concern, although he is invariablv invited to do 



THE "SUCKER'' LIST 239 

so; but, strange as it may seem, he is more than hkely to 
commit the same folly the second and third times, if the 
name or character of the scheme is changed. Hence, a 
list of such persons as have already been swindled is a 
valuable acquisition and has a cash value. 

I have in my possession several batches of letters which 
demonstrate the swindlers' efforts to get the '' sucker's " 
money after having once acquired his name, and I have 
selected one batch of them for publication, owing to the 
logical manner in which they can be presented, and to the 
clearness with which they illustrate the series of schemes 
operated. In connection with these letters \ shall show the 
arrest of some of the promoters. 

On Sunday, May 5, 1901, there appeared on the finan- 
cial page of a leading Chicago newspaper the following 
advertisement : 



$100 



PROPERLY INVESTED IN THE STOCK MARKET WILL 
GI\:E you a CLIANCE TO MAKE A FORTUNE. 
We are making big profits for our clients. If you will open 
an account with us for $100, $200, $500, or more, it will start you on 
the way to making a fortune in Wall street through successful oper- 
ating. Write to us at once for full particulars. 

LLOYD J. SMITH & SON, 

Bankers and Brokers, 
55 Broadway New York. 

Acting under instructions, a clerk in my oftice ad- 
dressed a letter to Lloyd J. Smith & Son, as follows : 

Chicago, May 6, 1901. 
Lloyd J. Smith & Son, 

New York City. 
Gentlemen : 

Kindly send me full information in regard to your method of 
operating in Wall street, and oblige Yours respectfully, 



240 



GOLD BRICKS OF SPECULATION 



TKUKpnotrK, 37n4 



Lloyd J. Smith & Son, 









Execute commission orders 
purchase or sitle. cash or 
moderate margin. 

STOt'KS— 10 shares upwards. 
CRAIX— 1,000 bushels upwards, 
COTTON— 100 bales upwards. 




No. 55 BROADWAY, 
NEW YORK. 1- 

Brooklyn Rapid Trajislt. 



July 19, 1901. 



Your attention is respectfully invited to a deal where you can 
maJce your handsomest piece of money this summer. A Deal that will not 
only prove, like all our past operations a money-winner, but one that 
will score unusually high profits. This fact will be due not to the 
natural large increase in business during the summer, carrying extra 
hundreds of thousands to New York's popular resorts, nor to the recent 
improvements and those still under way, but to the well laid plans of 
large manipulators, connected principally with one of America's greatest 
R. R. Systems, for the preliminary motive of making money through the 
fluctuations of the stock. When we say manipulators we do not refer 
to the numerous class of small, pettifogging manipulators, who have 
neither the capital or financial ability to manipulate anythingj but to 
names which, if made known would at once be recognized as great money- 
powers by. those interested in finances throughout the country. 

If you have been timid or hesitated for any cause (Dealing 
with irresponsible or incapable brokers, etc.) from joining us in the 
past, we urgently advise you to place a trial account for this "Deal" 
and learn for yourself that you can positively and continually make 
profits unheard of in other lines, by dealing with a firm in a position 
to acquire valuable infonr.ation with the facilities to follow up the 
same and always conservatively make extraordinary profits. 

This Deal will operate for about three weeks and should close 
out with a clear profit of $400 Net on every $100 invested. In other 
words taking profits on about 25 points gross based on a 5/& margin, 
fully secured by stop orders. Our commission, as in the past will be 
10^ of the Net profits of each customer. 

Do not delay, but take immediate advantage of this exceptional 
offer. 



j&^^.^mid-^^ 



FAC SIMILE OF LETTER RECEIVED P.Y A MAN WHOSE NAME WAS ON A " SUCKER " LIST. 



THE " SUCKER " LIST 241 

This little note opened a vast one-sided correspondence 
covering a year. The young man's name having found 
a place on the " sucker " list, he received numerous and 
tempting offers of permission to share in any number of 
" good things." The story is best told by giving a select 
few of the letters, circulars and blanks as he received them, 
interspersed with explanatory matter when necessary. 

(The following letters are all written on letterheads of 
Lloyd J. Smith ikSon.) 

New York, May 8th, 1901. 

Mv. , 

Chicago, 111. 
Dear Sir : 

Under separate cover we send you our Northern Pacific letter, 
which we believe will fully explain our method of operating in 
Wall street. 

The wa}- to open an account is to remit by Bank Draft, Check, 
Cash in Registered Letter, Post Office or Express Money Order. 
You are promptly credited and entered in " Deal " on the receipt of 
your remittance. 

This house is an old established one, and its success has been 
something phenomenal, particularly in the great " Bull " market of 
the past six months, and its workings have been favorably com- 
mented on in \\'all street. 

Hoping to be favored with an account with you. and that this 
will be the beginning of a long and prosperous one between us, we 
are. 

Very respectfully vours, 

LLOYD T. SMITH & SON. 



May 8th, 1901. 
MUTUAL INVESTMENT DEPARTMENT. 

Mr. , 

Chicago 111. 
Dear Sir : 

Your reply to our advertisement duly to hand. As stated we 
accept accounts of $100 and upwards for investment in our Stock 



242 GOLD BRICKS OF SPECULATION 

'' Mutuals," and made up of a number of subscriptions, aggregat- 
ing a substantial operating capital, for trading in stocks. We act 
only on the most reliable information at all times, and are always 
sure of our position. 

During the last seventeen months we organized and success- 
fully carried out fifteen " Deals," making an AVERAGE PROFIT 
OF OVER TWO HUNDRED AND SEVENTY-FIVE DOL- 
LARS ON EACH $ioo LN\'ESTED. Our last "Deal" just 
closed was in L'nion Pacific Stock, and wc scored a net profit of 
$462.00 on each $100 subscription. 

We now have valuable, private information regarding another 
TREMENDOUS DEAL IN NORTHERN PACIFIC STOCK, 
which will undergo enormous fluctuations quickly. This " Deal "' 
will start in a few days, and will be closed in about three or four 
weeks, when your profits and principal (less our commission of 
10%) will be promptly sent to you. 

Our country is experiencing an era of prosperity far in ex- 
cess of anything it has heretofore enjoyed. Each day brings forth 
new opportunities for the investment of capital. 

Realizing that the average investor has not sufficient time at his 
disposal to devote to a thorough examination of the many and 
A^aried propositions which are placed before him. while others are 
under great disadvantage through being located at a distance from 
Wall street and the Stock Exchanges, we oflfer you our services. 
We have endeavored to surround ourselves with keen, wide-awake 
men, shrewd experienced stock operators, who are thoroughly con- 
versant with the various opportunities which ofifer themselves to the 
investor. \\(t have unsurpassed facilities for obtaining the most 
valuable information regarding the contemplated movements of the 
manipulators of the leading active securities listed on the Stock 
Exchange. 

As to references, we can furnish the highest recommendations 
from Banks. Financial Agencies, and our Clients — the latter prob- 
ably being the most satisfactory, as they can testify from their own 
personal experience as to our many past successful and highly 
orofitable deals, and as to our promptness in remitting profits, etc. 

Should you desire to take part in our NORTHERN PACIFIC 

DEAL, your remittance of $100, or more, should be mailed to us 

promptly, and we cannot urge vou too strongly to take advantage 

of this unprecedented opportunity to BIG PROFITS QUICKLY. 

Very truly yours, 

'LLOYD J. SMITH & SON. 



THE '• SUCKER " LIST 243 

The following slip was received with letter dated May 
8, 1901 : 

Remit by Check, Bank Draft, Postal, Express or Telegraph 
Money Order or Cash in Registered Mail 
Lloyd J. Smith 81 Son, 

55 Ih-oadway, New York, N. Y. 

190 . 

Gentlemen : 

Please find enclosed $ to be placed to my credit for deal- 
ing in Stocks, Grain, etc., under your management and according 
to your best information and judgment for our mutual interest. It 
is agreed that you are to receive a commission of TEN PER 
CENT. OF THE NET PROFITS on all transactions for my 
account. 

Name, 

Address, 

WRITE NAME AND ADDRESS PLAINLY. 



PERSONAL. 

May i6th, 1901. 
MUTUAL INVESTMENT DEPARTMENT. 
NORTHERN PACIFIC OUR SPECIALTY. 
Dear Sir : 

What happened to most of the Stock Brokerage Houses and 
their clients in the big " Speculators Panic " of last week is now 
world wide history. Many firms failed and most of the small 
operators had their accounts entirely wiped out. 

On Alay 8th we wrote you : 

"NORTHERN PACIFIC, in which we just closed such a 
profitable operation will continue to be manipulated, and we can 
assure all who place an account for us to manage that they can 
reckon on 20 to 25 points in the operation, for we will have full 
and complete information in regard to the protected movement." 

In a market like this yon should keep your accoiint zvith Mil- 
lioncdre Houses who have abundant cash funds to meet all obliga- 
tions promptly. You should also keep your Speculative and In- 
vestment Accounts, as well as your Banking and Loan Business 
with houses that have brains and who can protect your interests. 

We right along offer you evef)' possible facility consistent with 



2U GOLD BRICKS OF SPECULATION 

careful banking and brokerage that large capital can command to 
participate in some of our "Deals." 

The ciionnons profits cleared in our last Xortlieni Pacific oper- 
ation, ranged from $1,300 to $2,000 oji each $100 inz'csted, the 
stock making a net gain of 163 points in one day alone — Panic 
Day. Nothing like this has ever happened before, and probably 
will not recur for some time to come, but we are kept closely posted 
of the movements of the manipulators and always know how to act, 
and being so favorably situated, we can act quickly on every bit of 
valuable information we receive. 

We now solicit your account of $100 upwards, to join us in 
another important deal in NORTHERN PACIFIC STOCK, and 
if you WISH TO RECOUP YOUR LOSSES AND MAKE 
BIG MONEY IN A VERY SHORT PERIOD OF TIME WE 
STRONGLY AD\ ISE YOU TO TAKE PART IN THIS 
NEW DEAL W^HICH WILL BE ANOTHER ONE OF ENOR- 
MOUS MAGNITUDE. 

Trusting to receive your account at once by return mail, as time 
is very precious in this case, we are Truly yours, 

LLOYD J. SMITH & SON. 



Personal May 23rd, 1901. 

COLORADO . FUEL & IRON. 
Dear Sir: 

The enormous profit cleared for our customers in our last 
Northern Pacific Deal, ranging from $1,500 to $2,000 on each $100 
invested by them has broken the record, and established the high 
mark for incomparable success in the " MUTUAL INVEST- 
MENT DEPARTMENT " of this house. This alone is sufficient 
to enlist the most implicit confidence of all our correspondents, and 
we therefore, without waste of words, present before you another 
chance to make UNUSUALLY LARGE PROFITS, bv subscrib- 
ing for our COLORADO FUEL AND IRON STOCK'" DEAL.'' 
which we are sure will NET A HANDSOME AMOUNT TO 
YOUR CREDIT. 

The test of time is the incontrovertible evidence of the high 
financial standing and sound policy pursued by us, and every pos- 
sible facility is offered to our clients consistent with careful bank- 
ing and brokerage that large capital can command. We carried 
our clients through the recent panic, not onlv without a single loss, 
but EACH AND EVERY CLIENT SCORED AN UN- 



THE " SUCKER " LIST 245 

EQUALLED PROFIT FOR THE SHORT TLME THE OPER- 
ATION LASTED. 

LAIPORTANT INFORMATION OF THE MOST VALU- 
ABLE CHARACTER has just been obtained by us revealing a 
gigantic concentrated effort to create AN ENORIMOUS MOVE- 
J^IENT IN C. F. I. STOCK, and if you desire to MAKE LARGE 
PROFITS, or recoup recent losses, if you were caught on the 
wrong side during the panic, we strongly urge you to send in your 
subscription for this new DEAL WHICH WILL BE OF ENOR- 
MOUS MAGNITUDE. 

Accounts of $100 and upwards will be accepted, and if you haye 
been convinced by our past record, that our information is thor- 
oughly reliable (and we say positively that we know we can depend 
on it), we tell you emphatically that you can safely send us $200, 
$300, $500 or $1,000 for this "deal," and we are certain YOU 
NEVER HAD A BETTER CHANCE TO MAKE BIG 
MONEY. This '' Deal '' will not close as quickly as our last N. P. 
operation, but will extend over a verv brief period, and settlement 
of all accounts will be made within THIRTY DAYS FROM THIS 
DATE. 

We urgently solicit your prompt response with as liberal an 
account as you can command. Truly yours, 

LLOYD j. SMITH & SON. 



PERSONAL. 

• June 4th, 1901. 

STRICTLY PRIVATE AND CONFIDENTIAL. 
UNPRECEDENTED OPPORTUNITY. 
Dear Sir : 

HERE IS A CHANCE FOR A $500 INVESTMENT TO 
MAKE A FORTUNE. We cannot accept accounts of less than 
$100 in any of our " Deals," and in this particular one we recom- 
mend you to invest at least $200 to $500 as it is a chance the like 
of which you will probably never have again. 

A confidential clerk in one of the large New York Stock Ex- 
change houses has handed us your name, saying that you have been 
interested in the Stock Market to quite som.e extent, and beheving 
you to be an investor of some means, we invite you to participate in 
a profit-taking " Deal " of such tremendous importance as to eclipse 
any of our great " Deals " for years past, except possiblv our 
"NORTHERN PACIFIC POOL" in which zee scored 'promts 



246 GOLD BRICKS OF SPECULATION 

ranging from $i,jOO to $2,000 on each $100 invested zvithin less 
than tzvo zveeks' time. 

This " Deal '' will be entirely manipulated in accordance with 
information of the most private character which we have indirectly 
from a Wall street Magnate and Financier of the greatest promi- 
nence, and the profits that will be made in this " Deal " will be such 
as to insure a small fortune to every investor of $500, $1,000, $2,000 
or more, less than which we urge you not to subscribe in this partic- 
ular " Deal, ' although small accounts of $100, upwards, will insure 
substantial profits. 

Of all our numerous profitable " Deals " for years past, as stated, 
this will be par excellence one of the best, safest and largest-paying 
ones we ever conducted, or that was ever conducted by any other 
brokerage house in the country, and believing you to be an investor 
of considerable means, we now offer you this chance — absolutely 
safe — to make the greatest profits of your life, and recoup your 
losses, if any, which you may have sustained in the past through 
bad investments with irresponsible or incompetent brokers. We are 
Avilling to give you the lion's share of these profits, our charge 
being but 10%. There is no philanthropy about it with us. We 
will make a good profit, too. on your money. We furnish the expe- 
rience, knowledge, facilities and pay all expenses. You furnish 
the funds. That is fair for both. We shall invest heavily in this 
" Deal " with our own capital, and the more capital we have in 
hand to join with ours, the more extensive and profitable will be our 
operations. Your principal and ])rofits will be forwarded to you 
at the culmination of this deal, within three weeks from this date. 

Trusting \ou will strain a point to make your remittance as 
large as possible for this particular " Deal," we remain 

Yours verv trulv, 

LLOYD J. SMITH & SON. 



PERSONAL. j,,,,e 14, 1901. 

STRICTLY PRR'ATE AND CONFIDENTIAL. 
UNPRECEDENTED OPPORTUNITY. 
SUPPLEMENTAL DEAL. 
To Our Clients and Prospective Ones : 

We again call your attention to the FACT that we have in- 
formation regarding one of the biggest stock '' Deals " of this year 
and cordially and urgently request you to take advantage of this 
opportunity. 



THE " SUCKER " LIST 247 

A CHANCE FOR $100 INVESTMENT TO MAKE $750. 

We cannot accept accounts of less than $100 in any of our 
" Deals," and in this particular one we recommend you to invest at 
least $200 to $500, as it is a chance the like of which you will prob- 
ably never have again. 

We understand that you have been interested in the Stock Mar- 
ket to quite some extent, and believing you to be an investor of some 
means, we invite you to participate in a profit-taking- " Deal " of 
such tremendous importance as to eclipse any of our great " Deals "' 
for man\- years past, except possibly our " NORTHERN PACI- 
FIC POOL." in which ive scored profits ranging from $1,300 to 
$2,000 on each $100 invested within less than tzvo weeks' time. 

This *' Deal " will be entirely manipulated in accordance with 
information of the most private character which we have indirectly 
from a Wall Street Magnate and Financier of the greatest prom- 
inence, and the profits that will be made in this " Deal " will be 
such as to insure a small fortune to every investor of $500, $1,000, 
$2,000, or more, less than which we urge you not to subscribe in 
this particular " Deal," although small accounts of $100 upwards, 
will insure substantial profits. 

Of all our numerous profitable " Deals " for years "past, as 
stated, this will be par excellence one of the best, safest and largest- 
paying ones we ever conducted, or that was ever conducted by any 
other brokerage house in the country, and believing you to be an 
investor of considerable means, we now offer you this chance-— 
absolutely safe — to make the greatest profits of your life, and re- 
coup your losses, if any, which you may have sustained in the past 
through bad investments with irresponsible or incompetent brokers. 
We are willing to give you the lion's share of these profits, our 
charge being but 10%. There is no philanthropy about it with us. 
We will make a good profit, too, on your money. We furnish the 
experience, knowledge, facilities and pay all expenses ; you furnish 
the funds. That is fair for both. We shall invest heavily in this 
*' Deal " with our own capital, and the more capital we have in 
hand to join with ours, the more extensive and profitable will be our 
operations. Your principal and profits will be forwarded to you at 
the culmination of this deal, within three weeks from this date. 

Trusting you will strain a point to make your remittance as 
larg:e as possible for this particular " Deal," we remain 

Yours verv trulv, 

LLOYD J. S^MITH & SON. 



248 GOLD BRICKS OF SPECULATION 

It will be seen from the foregoing letters that these 
schemers desired to impress upon the person to whom they 
were sending mail that great secrecy should be maintained 
as to their operations, for if they were known, they ar- 
gued, people could go into the market and ])lock their plans 
of making money and presenting it to the '' sucker " who 
answered their letters with " fat " remittances. At the 
head of most of their letters on different stocks, etc., of 
which they claimed to have superior knowledge, there ap- 
peared in capital letters the following: '' PERSONAL," 
and '\ PERSONAL, STRICTLY PRIVATE AND CON- 
FIDENTIAL.'' This was to lead the " sucker " to believe 
that he was in on a very important deal, and that '' silence 
was golden," and also that he was favored when allowed 
to participate in such gigantic operations as they carried 
on in Wall Street. 

Llo}xl J. Smith & Son apparently found it desirable to 
discontinue "business" about the last of June, 1901, but 
before doing so their affiliated swindles began work on the 
Smith " sucker " list, and the young man received first a 
letter from the " American Slock and Grain Review," as 
follows: 

THE AMERICAN STOCK AND GRAIN REVIEW, 
52 Broad Street, Established 1892. 

New York, June 15, 1901. 
Dear Sir : 

We desire to call your attention to the advisability of becoming 
a subscriber to this journal. We have been established since 1892, 
and to-day have a circulation not equalled by any financial paper in 
the country. Large as our circulation has been in the past, it has 
increased with gigantic strides since the beginning of this greatest 
'' Bull " market in the history of the world. With records of 
shares sold constantly broken, and these running to over 3,000,000 a 
day, there naturally is need for more journalistic efforts of a finan- 
cial nature than can be supplied by the daily press ; it is for this 



THE " SUCKIiR " LIST 2-19 

reason that our circulation lias more than trebled since last Fall, 
aided by the fact that, as our power and influence have always been, 
in not only stating facts as they are, but, in protecting the outside 
public from the numerous " fake tipsters," guessers and disreput- 
able concerns who infest Wall street. Subscriptions, $2.00 per 
annum, pa\able in advance. 

COLLECTION DEPARTMENT. 

This department was established for the purpose of forcing the 
repayment of all funds sent to disreputable concerns who never even 
make a pretence to invest their customer's money ; these " fakers " 
we can make disgorge the money sent them and profits that should 
have been made, or drive them out of the business. Should they 
have finances of their own, our legal proceedings against them 
rarely fail. 

.AIONEY INVESTED RECENTLY IS MUCH EASIER TO 
COLLECT THAN AFTER SUCH FIRMS BECOME FINAN- 
CIALLY EMBARRASSED, OR QUIT BUSINESS. 

We wdll look after any collections you may have of this nature, 
charging you 5% of the amount actually collected. You have abso- 
lutely no other charges to pay, and you pay us nothing at all, unless 
we collect something on the account. 

REPORT DEPARTMENT. 

]\Tany millions have been made by the outside public in that stu- 
pendous " Bull " market of late, and many more may be made 
before it is over. Of course, " breaks '' of more or less importance 
are bound to occur, and even panics may be precipitated bv the 
transpiration of sudden and unforeseen events. Many have invested 
and lost their money through trusting to dishonest or irresponsible 
brokers ; it therefore behooves the prospective investor to know with 
whom to deal, and whom to avoid. \\'ith the right broker you will 
make money, and good money ; with the wrong one you will inevit- 
ably lose all. It is for the guidance of the public that we have insti- 
tuted this department, and will furnish a report on anv broker 
desired for $1, and our correspondent should govern himself 
accordingly. 

Soliciting your subscription and patronage of any or all of our 
departments, we remain. \Mth respect, 

THE AMERICAN STOCK & GRAIN REVIEW. 



Another " fake " financial paper in exposing this pub- 
lication uses the following language : 



250 GOLD BRICKS OF SPECULATION 

" The American Stock and Grain Review, a so-called financial 
paper, has recently made its appearance, and seems to exist for the 
sole purpose of exploiting Lloyd J. Smith & Son. The writer has 
called at the office of the alleged publication a number of times, but 
was always unable to find anyone or to obtain a copy of the paper. 
' They come here usually in the morning,' said the janitor, ' and 
after a few minutes they are gone and usually do not return the 
rest of the day.' Though unable to obtain a copy of the paper at 
the ' office ' here, we have received a large number of copies from 
our subscribers out of the city. On the letter head of the American 
Stock and Grain Review the statement is made ' Established 1892.' 
For the benefit of our readers, and also for the enlightenment of the 
owners and subscribers of the American Stock and Grain Review, 
we might mention that the sheet first saw the light of day in the 
month of September, 1899. ^^ went to press for less than three 
months, and was foisted upon a suft'ering public 1t\' a well-known 
man in Wall street, who allowed it to suspend and docs not know 
one of the persons now connected with it. It ap])ears that an oblig- 
ing printer loaned the electro heading to the present mythical man- 
ager, with the result that the sheet is filling a ' long felt want ' by 
boosting one Lloyd J. Smith & Son, advertised as a well known 
banking concern ; Smith & Son are as hard to find as the manager of 
the office of this publication, which by its a1)le endorsement anent 
Smith & Son, would lead our country cousins to believe that it is 
moulding the opinions and affairs of Wall street." 

While it is a case of the '' pot calling the kettle black," 
it puts the reader in possession of the facts in the case. 

Next came letters from the " Banking House " of 
Frank ^^^ Carlisle & Co., guaranteeing principal and 
profits : 

BANKING HOUSE OF 

FRANK W. CARLISLE & CO., 
Broad Exchange Building, 
Special Letter. 

New York, ]\mQ 22, 1901. 
NATIONAL LEAD CO. 
Dear Sir : 

It is our intention during the next thirty days to join the man- 
ipulators in the stupendous deal now contemplated in NATIONAL 
LEAD CO. STOCK, as we will be informed of the exact nature of 



■ THE " SUCKER" LIST 25i 

the manipulations, being kept constantly in touch with the great 
magnates and giant interests who are the powers of Wall street in 
connection with this deal. 

At the present moment we know that National Lead Co. Stock is 
ridiculously low^ as compared with its value and with the advances 
in similar stocks. WE ALSO KNOW OF CERTAIN LEGIS- 
LATION THAT WILL MATERIALLY AFFECT THIS 
COMPANY'S PROPERTY and we know that with a proper 
handling of purchases and skilled manipulation of the quotations 
and the news of this stock, we can, not only mark it up at the right 
time, to its intrinsic value, as shown by new conditions that will add 
largely to its earnings, but we can create a short interest in the 
stock at a time when it is most needed, and this short interest, if 
properly handled, may mark the stock many points beyond any 
figure that could be named by a conservative buyer. 

Thus it was with Northern Pacific to a degree unprecedented in 
Wall street ; by similar manipulations of the stocks of companies 
whose earnings were increasing and whose future w^as bright, we 
have seen Missouri Pacific advanced steadily 60 points, L^nion 
Pacific, 70 points ; Atchison, 60 points ; Rock Island, 60 points and 
St. Paul, 70 points. 

Here is an opportunity for you to make thousands of dollars and 
surelv, without a chance of loss, as, if vou take part in this deal 
YOU BECOAIE A AIANIPULATOR INSTEAD OF A LAMB, 
and in this manner our Mr. Frank W. Carlisle learned to make his 
fortune in Wall street instead of losing his money as inexperienced 
speculators and incompetent stock brokers invariably do. 

By concentrating our efforts into the purchasing of NATIONAL 
LEAD STOCK, and combining our resources with the capital re- 
ceived from our clients, additional heavy purchases will be attracted 
by outsiders, thus FORCING UP THE STOCK MANY POINTS 
QUICKLY, when we will take our profits and unload our holdings 
again on the same outsiders who were a material factor in aiding 
our manipulation. 

If you wish to join in this manipulation, you must be prompt 
with your remittance, and no subscriptions of less than $250 will be 
received by us for this special operation. We reserve the right to 
reject any or all subscriptions. Our charge will be 25% of your 
proportion of the profits over and above the amount of your prin- 
cipal, and 10% additional profit, which we GUARANTEE to you. 
That is. we GUARANTEE YOUR PRINCIPAL AND 10% 
PROFIT IN ADDITION, each subscription of $250 paying you 



252 GOLD BRICKS OF SPECULATION 

back $275, or more, at the close of the operation, which, as stated, 
will extend over a period of about thirty days. 

Your subscription of $250 or more should be sent in promptly 
by return mail in order to be in due season to take advantage of 
this offer. Yours respectfullv, 

FRANK W. CARLISLE & CO. 



The following" slip was received with letter dated June 
22, 1901 : 

1901. 

Frank W. Carlisle & Co., 

Broad Exchange l)ldg., Xew York, N. Y. 
Dear Sir : 

Please find enclosed Dollars, to be invested by you 

on margin in buying and selling Stocks listed on the New York 
Stock Exchange according to your best judgment and advices for 
my account. 1 agree to allow you 25% over the 10% guaranteed of 
the profits as your commission for managing my account. It is 
also understood that you are to send me a statement of all transac- 
tions and to remit me my share of the profits on the ist and 15th of 
each month until further notice. I further reserve the right to 
withdraw any part or the whole balance to my credit without fur- 
ther notice and cancel this order. 

The above amount is guaranteed by }ou against loss, and a 
profit of not les^ than 10% per month. . 

Name 

Address 

$ 

REMIT BY BANK DRAFT, MONEY ORDER, CHECK 
OR CASH IN REGISTERED MAIL. 



New York, July 5th, 1901. 
ATCHISON DEAL MADE $465 ON EVERY $100 
INVESTED. 
U. S. STEEL DEAL WILL AIAKE $500 ON EATERY $100 

INVESTED. 
Dear Sir : 

Had you taken part in our last '' Deal " you would have made 
profits as per above on every $100 placed with us. We regret ex- 



THE "SUCKER" LIST 253 

ceedingly, for your sake, as well as our own, that you have never 
yet favored us by opening an account, as you can see by comparing 
the results of all our offers with the subsequent course of the stock 
being manipulated we have invariably made GIGANTIC PRO- 
FITS for each and every one of our customers and for ourselves. 

We not only took care of all our clients who had individual 
accounts with us during the recent slump, but made wonderful 
profits for those interested in our " Special Deals." If you can find 
anyone else to do better or who can more surely make larger and 
quicker profits for you, either in the stock market or any other line 
of business we will no longer solicit your patronage. On the other 
hand, if you want to make the profits by which so many shrewd 
and enterprising people become rich, while their more conservative 
neighbors plodding the even tenor of their way, wonder how they 
got it all, we advise you to Speculate Judiciously With Houses In 
The Best of Standing And Having Every Facility for Making 
Money for Themselves and Customers and you will make a fortune 
quicker than by any other way under the sun. 

The " Deal " in U . S. Steel is no guess work, but an operation 
to make money by those in a position to manipulate the stock for 
both themselves and such houses as actually assist them not only 
financially, but in many other ways. 

The present summer will show an active continuation of the 
" Bull " Market and particularly on U. S. Steel, and this informa- 
tion we know will satisfy all our customers who have asked the 
question. We are going to make first-class money in this " Deal " 
shortly to commence, and if you have not already an account with 
us, we advise you to open one without unnecessary delay and benefit 
to the extent of $500 on every $100 placed for U. S. Steel. The 
operation will close a few days before or after July 25th, in the 
meanwhile, von will be advised, weekly, of the standing of your 
account. 

Our charge will be 25% of your proportion of the profits over 
and above the amount of your principal, and 10% additional profit, 
which we guarantee to you. That is, we GUARANTEE YOUR 
PRINCIPAL AND 10% PROEIT IN ADDITION, each sub- 
scription of $100 guaranteeing you back $110 or more at the close 
of the operation, which, as stated, will be about July 25th. 

Your subscription of $100 or more should be sent in promptly 
by return mail in order to be in due season to take advantage of this 
oflfer. Yours respectfully, 

FRANK W. CARLISLE & CO. 



254 GOLD BRICKS OF SPECULATION 

New York, July 27, 1901. 

SURE MONEY DEAL IN ROCK ISLAND. 
Dear Sir : 

For the second time this month we have received information of 
the highest import, relative to making money quickly and positively 
in the manipulation of certain stocks. 

Our operation in U. S. Steel, as per ours of the 5th inst., has 
already made a clear profit on the rise and fall of eighteen points, 
netting thus far about $350 on every $100 placed in time to partici- 
pate. We, however, will clear the $500 on every $100 as we 
assured you we would ; this operation will terminate before the end 
of the month, when an immediate and detailed account will be ren- 
dered for your share of the profit, less our commission. 

Rock Island Stock is about to undergo a large fluctuation, prin- 
cipally on the " bear " side, and we will make the largest kind of 
profits in operating the stock, making from $300 to $500 on every 
$ioo in the " deal." This stock at present is showing good activ- 
ity, but this is no criterion by which to measure, for the only way 
in which Extra Large and Absolutely Certain Profits Can be Made 
is in Taking Part on the Inside of This Movement. We are and will 
be in this position all through this big operation, which will termi- 
nate August 25th. 

We earnestly request our customers and others to make their 
accounts for this " deal " as large as possible, as very big money 
will be made, probably exceeding that stated above. 

Our charge will be 25% of your proportion of the profits over 
and above the amount of your principal and 10% additional profit, 
which we guarantee to you. That is, we GUARANTEE YOUR 
PRINCIPAL AND 10% PROFIT IN ADDITION; each sub- 
scription of $100 guaranteeing you back $110 or more at the close 
of the operation, which, as stated, will be about August 25th. You, 
in the meanwhile, will be notified weekly of the standing of your 
account. 

Your subscription of $100 or more should be sent in promptly by 
return mail in order to be in due season to take advantage of this 
offer. 

Yours respectfully, 

FRANK W. CARLISLE & CO. 



THE ''SUCKER" LIST 255 

New York, Sept. 30, 1901. 
Strictly Personal. 
Mr. , 

Chicago, 111. 
Dear Sir : 

We regret that you have not as yet been added to our long and 
steadily increasing list of thoroughly satisfied and money-making 
customers from nearly every section of the country. So, believing 
you to be a shrewd person fully willing to grasp an unusual chance 
to make a good piece of money with absolutely no risk attached, we 
will make a special point to obtain your patronage and OFFER 
YOU THE FOLLOWING RARE OPPORTUNITY WHERE 
YOU WILL MAKE BIG MONEY AND CANNOT LOSE A 
DOLLAR. 

SUGAR will be the great herald of the coming " bull " market. 
This stock has already been greatlv depressed for manipulative pur- 
poses and will have a movement of'OVER 30 POINTS QUICKLY. 
This will mean a clear and absolute profit of at least $600 on an 
investment of $100. Our information on this and every other occa- 
sion for the last 25 years is derived from sources to whom we have 
and do now render valuable aid and who give away absolutely 
nothing without due reciprocity ; and, it is needless to state that 
when we do take part in an operation it is only on mutually profita- 
ble KNOWLEDGE where extra good money MUST be made. 
Such has been the conservative, remunerative course pursued by 
us for the last 25 years, and it is due to ignoring partial informa- 
tion and ACCOMPLISHING results on thorough information that 
no one has ever lost a dollar operated by ns. Luck is a rare element 
in Wall St. ; money is made on sound knowledge only. 

If you do not endorse stock operations we have no time to dis- 
abuse your mind further than to say that such transactions are 
sanctioned by every civilized country in the world, and that to you 
as a sensible person the further ethics of the case should cut no 
figure with your pocketbook. So do not waste time and say you 
may give us a trial later ; do so now^ when you will make a profit 
that you will long remember and when vou can benefit by the 
following. WE WILL GUARANTEE' EVERY DOLLAR 
PLACED IN THIS OPERATION AND FURTHERMORE, 
WE WILL GUARANTEE YOU AN ABSOLUTE CLEAR 
PROFIT OF 10% AT THE LOWEST ESTIMATE. This 
SUGAR operation will be in continuance for about one month and 



256 GOLD BRICKS OF SPECULATION 

profits to the 15th of October will be remitted on that date. We 
are riot good Samaritans but conduct these operations to make 25% 
commission on mone}' invested in addition to our own, and make 
the above guarantees to prove our statements. 

Your prompt acceptance for the largest figure possible and not 
under $100 will mark an emblazoned epoch in the history of your 
finances, as it will open a prosperous and extensive career be- 
tween us. Yours respectfully, 

Frank W. Carlisle & Co. 

N. B. — On close of this operation, 6% interest will be allowed 
on all accounts placed pending future operations. 



New York, Oct. 12, 1901. 
A LIFETIME CHANCE. 
WALL STREET'S BIGGEST DEAL. 
GREAT NORTHERN RAILROAD CONTROL. 
Dear Sir : 

Our clients, who know us best, understand how thoroughly we 
have mastered every detail of our business, and when we make a 
statement they are sure of its being conservative and truthful. 
/' Experience teaches," and our clients' experience with us has taught 
them to place implicit reliance in our judgment. We have offered 
you many opportunities to take part in our special deals. Why 
do you hesitate? Others are reaping the benefit of our experience, 
inside information and sound judgment, and making profits rang- 
ing from $300 to $500 on each $100 they invest with us. Why do 
you not do the same? 

SPECIAL DEAL IN GREAT NORTHERN RAILROAD 
STOCK. The most tremendous " deal " tlie stock market has 
ever known is now being planned. HILL-MORGAN PLAN TO 
CONTROL THE GREAT NORTHERN RAILROAD. The 
New York Times says (Friday, Oct. 11, 1901) : ''The advances 
in the Morgan properties, notably the ' coalers ' was a conspicuous 
feature, the coincident strength of these and the Standard Oil 
vSecurities being taken in some parts of the ' Street ' to INDICATE 
THAT THE MARKET LEADERS HAD COME TO THE 
CONCLUSION THAT THE TIME WAS OPPORTUNE FOR 
AN UPWARD ^lOVEMENT IN STOCKS." As vou know 
giant interests are working to obtain CONTROL OF THIS TWO- 
BILLION DOLLAR TRUST. The New York Journal savs 



THE " SUCKER " LIST 257 

(Friday, Oct. ii, 1901) : "2 Billion Trust in Railroads Planned 
by Morgan. Financier to Consolidate All Northwestern Roads." 

We are in receipt of strictly PRIVATE AND CONFIDEN- 
TIAL INFORMATION that the manipulators are planning the 
largest deal in this stock that Wall Street has ever known. We 
will be posted when to buy and when TO SELL, and without 
exaggeration we are positive that you can safely count on A Profit 
of from $300 to $600 on each $100 you invest zvith us in this 
Special Deal, for zvhich yon will receive a zvritten certificate of 
Gnarantee by return mail. 

This " deal " will start right in now in a few days and will close 
November 10, 1901. when lx)th your profits and principal zvill be 
remitted to you. 

Wq say emphatically, that " this is a Lifetime Chance to make 
Enormous Profits," and urge you not to hesitate, but send in 
promptly by return mail, or as soon thereafter as it is possible for 
you to do so, your remittance of $100, or more. If convenient, 
send us $200, $300, $400 or $500, as our information is absolutely 
reliable, and we know you will make " A tremendous profit zuithout 
a doubt." 

Trusting to receive your remittance promptly, we are 

Yours very truly, 

Frank W. Carlisle & Co. 

The following slip was received with letter dated 
October 12, 1901 : 

1901. 

FRANK W. CARLISLE & CO., 

Broad Exchange Bldg., New York, N. Y. 
Dear Sir : 

Please find enclosed Dollars, to be invested 

by you on margin in buying and selling Stocks listed on the New 
York Stock Exchange according to your best judgment and advices 
for my account. It is understood that you are to send me my 
profits every week, and that my principal is withdrawable on one 
week's written notice. 

Name 

$ Address 

REMIT BY BANK DRAFT, MONEY ORDER, CHECK OR 
CASH IN REGISTERED MAIL. 



258 GOLD BRICKS OF SPECULATION 

After Frank \\\ Carlisle & Co. had sent these several 
tempting- letters, without results, the name and address of 
the young man apparently became common property and 
"August Zimmerman & Co., Bankers and Brokers," the 
original concern established prior to Lloyd J. Smith & Son, 
tried their hand as follows: 

AUGUST ZIMMERMAN & CO., 

Bankers and Brokers, 

Park Row Building. 

New York, 1901. 

TREMENDOUS A:\IERICAN SUGAR DEAL. 

PRINCIPAL GUARANTEED. 

$100 SHOULD MAKE $750. 
Dear Sir : 

We beg- once more to call yonr attention to the present stock 
market. We have no doubt that you. as a shrewd operator, have 
watched the quotations of the various stocks, and carefully note 
as well as we do that the market has been steadily declining during 
the last two months. Previous to the commencement of these 
drops in vakiation we were on the Bull side of the stock market, but 
just as soon as the present depression started in. we, in conjunc- 
tion with other large stock operators, acting in harmony with the 
magnates of Wall street, who manipulate these gigantic deals, were 
well aware of th.e intended Bear raid and started right in to sell 
" short," ever since which time we have made enormous profits, 
selling stock at high prices and buying in, or '* covering '' on each 
five points drop. In this way you can see what enormous profits 
we have made. The stock market has on an average (Iroi)ped from 
ten to fifteen points during the last few months. 

\\^e predict that the market will continue to drop during the 
next two months. Giant interests are now at work to depress 
values considerably below the present level, and a great fortune can 
be made by following in the steps of these Kings of Wall Street. 
When stocks are low enough along in September or October, these 
same magnates will step in and bu}- up all the stock offered and thus 
start another Bull movement, making large profits later on. For 
the present the stock market will continue to drop and fortunes can 
now be made by selling " short." 



THE " SUCKER " EIST 259 

We are now organizing a deal in American Sugar, and from 
information just received, which comes to us from the same reliable 
source as heretofore, we expect this giant deal now pending in 
Sugar stock will be one of the greatest we have ever been interested 
in. Each $ioo hwcsted in this particular deal should realize a 
profit of $7jO. This is our prediction on this special deal and zue 
sincerely believe it zvill come true from the valuable private informa- 
tion zee have just received. 

This deal being one of the greatest importance will start within 
a very few days and your remittance of $ioo, $200, $300, or more 
should reach us at the very earliest possible moment. Your princi- 
pal invested, together with profits, will be remitted to you promptly 
as usual at the close of the deal in about three weeks from this date. 

Trusting you will not fail to take advantage of this exceptional 
opportunity to make enormous profits quickly, and that you will 
send in your remittance for a trial account at once by return mail, 
we are. Yours very truly, 

August Zimmerman & Co. 

The following slip was received with the above letter: 
SPECIAL AMERICAN SUGAR SUBSCRIPTION BLANK. 

1901. 

AUGUST ZIMMERMAN & CO., 

13-21 Park Row, New York City. 
Gentlemen : 

I hand vou enclosed for $ 

to be invested in your SPECIAL DEAL in AMERICAN SUGAR 
vSTOCK, for my account, according to your best information and 
judgment for our mutual interests. I agree to allow you 25% of 
my net profits. Prompt settlement is to be made at close of deal, 
in about 3 weeks from date you receive the remittance, and it is 
understood that my Principal is Guaranteed 

Name 

Address 

Accounts of $100 upwards received. Remit by Bank Draft, 
Money Order or Check. 

Four other concerns, all run by the same gang, endeav- 



260 GOLD BRICKS OF SPECULATION 

ored to show the young man how easy it was to make 
money. 

BANKING HOUSE OF 

ALEX. J. THURMAN &. CO., 
50 Broadway. 

New York, Aug. 2, 1901. 
Dear Sir : 

We desire to place before you our " special letter '' which 
describes our successful handling of accounts in the New York 
Stock Market. We having opened some time ago a " special in- 
vestment department " for the management of accounts for out of 
town clients and those who have neither the time nor the experience 
to make a success of dealing in stocks, and we are pleased to say 
we have made this department a decided success, as many of our 
clients will testify. 

In this department we accept sums of $100, $200, $500, and 
upwards, which is managed by us on the most positive and reliable 
information obtainable, bv being in close touch with all afifairs of 
Wall Street. 

Being a successful and reliable house we are in a position to 
accept the funds of our clients and assure them that we can manage 
their investments, and insure large profits. All accounts of our 
clients are handled by most skillful and shrewd operators, and 
investments are only made when information regarding the future 
movements of a stock to be dealt in is at hand. 

In the early part of last January we wrote our clients and corre- 
spondents urging them to take advantage of a deal in " Atchison " 
common stock which was then selling at about $43 a share, and 
which has since that time sold at $91. We however were satisfied 
with a liberal profit and closed the deal on Feb. i6th, making a net 
profit on each $100 invested (after deducting all commissions) of 
$311.29. Our next deal was in the same stock which we purchased 
on February 26 at 56^^, and closed on March 29, at 74%, making 
a net profit of $404.10. Another deal in Amalgamated Copper 
stock made a profit of $358.50 on each $100 invested. 

W^e recently closed a deal in St. Paul and take pleasure in sub- 
mitting below a statement of the transactions which show exactly 
the amount invested, profits obtained, and the time required : 



THE ''SUCKER" LIST 261 

Statement. 

June I, Bot. 25 St. Paul 16434 $4106.25 

June 21, Brokerage Com. & Tax 7.25 

June 21, Our Commission 38.65 

$4152-15 

June 1st, Credit by Cash $ 100.00 

June 21, Sold 25 St. Paul, 180 4500.00 

$4600.00 
4152.15 

Original Inv. & Profits $ 447.85 

Net profits for this deal — $347.85. 

• The above statement which shov/s a handsome profit, was as you 
see obtained in St. Paul. We are just advised that there is to be a 
big movement in '' Sugar " stock in the very near future, which 
will be (as it always has been) the *' biggest " money maker in 
Wall St. 

We strongly urge you to take advantage of the opportunities 
of securing large profits in stocks which can be obtained by placing 
your funds under the management of a house that has reliable in- 
formation, and that has in every instance made most satisfactory 
profits for its customers, the names of several of which we 
would be pleased to furnish you upon application. We will start 
operations in this '' Sugar Deal " within a few days, and we hope 
to number you among our clients with a trial account, as we are 
confident we can secure profits for you that will warrant your 
patronage in the future. This deal will be closed about August 
26th, at which time your original investment and profits will be 
subject to your order. Our commission for handling your account 
in this department will be 10% of the net profits on each deal, 
which we deduct at the time of settlement. 

Trusting we may be favored by receiving an account from >ou 
for this transaction, for which we enclose order blank we beg to 
remain. Yours very truly, 

Alex. J. Thurman & Co. 



The following slip was received with letter dated 
August 2, 190 1 : 



262 GOLD BRICKS OF SPECULATION 

Remit by Check, Bank Draft, Postal Express or Telegraphic Money 
(3rder or Cash in Registered Mail. 

INVESTMENT DEPARTMENT. 



Banking House of ALEX. J. THURMAN & CO., 
50 Broadway, New York. 

1901. 

Gentlemen : 

Enclosed find $ which please place to my credit 

for investment in Stocks, Grain, etc., uncler your management and 
according to your best judgment and information for our mutual 
interest. 

I agree to allow you to deduct TEN PER CENT OF MY NET 
PROFITS as }Our commission for handling my account. 

Name 

Address 

Write Plainly. 



BANKING HOUSE OF 

ALEX. J. THURMAN & CO., 
50 Broadway. 

New York, Sept. 3rd, 1901. 
To Correspondents : 

In our last letter to you we called your attention to a deal that 
we were about to conduct in Sugar stock, and we regret that you 
did not avail yourself of the opportunity at that time by opening 
an account. We took advantage of the low price of Sugar when 
it went below 130, and made purchases for all our clients, and on 
the recent cjuick advance in the stock we took our profits and 
were able to report a profit to our customers of $275 on each $100 
invested. This amount of profit is not quite up to what we have 
secured in some of our past deals, but when the general dullness 
of the stock market the past few^ weeks is taken into consideration, 
wc believe that the amount of profit has met the approval of our 
customers ; however, the fall boom in stocks has started in good 
shape, and we are confident of our opinion that there is as good 
opportunity for big profits at this time as there was one year ago, 
when such enormous profits were made. 

We give you here below a few figures showing the range of 
prices for the past year in a few prominent stocks, and you can 
readilv see that on the present basis there is a good opportunity to 



THE " SUCKER " EIST 263 

make investments. Wall Street is confident of higher prices than 
ever the coming autumn, as everything in the situation warrants a 
big advance. Do not wait until the best opportunities have passed, 
but make your investments now and get the benefit of the rise which 
is sure to come. We are confident that big money will be made in 
the coming market, and we particularly urge you to open an 
account for our coming deal in Union Pacific stock, which as you 
can see is selling some 30 points below its previous high price, and 
we have carefully gathered the best information regarding this 
stock, and we positively assure you that it is a safe transaction 
to enter, and that satisfactory profits will result from the operation, 
and we trust that if you are in a position to open an account that 
you will favor us with a trial at once for our coming deal. 

\\'e will accept as in the past accounts of $100, $200, $300, and 
upwards, and our commission for handling your account will be 
as usual, 10% of the net profits. The deal will close about Sep- 
tember 28th, when both your principal and profits obtained in this 
transaction can be withdrawal in whole or part, or re-invested as 
you may desire. We would be pleased to furnish you upon applica- 
tion the names of a number of our regular clients, who have par- 
ticipated in many of our recent transactions, that you may corre- 
spond with them and get their opinions as to our ability in handling 
your funds successfully. 

Hoping to be favored wdth a trial account at once ,so that we 
may take advantage of the present market, for which we enclose 
our order blank, we beg to remain. 

Yours very truly, 

Alex. J. Thurman & Co. 



APPLEGATE, LOHR & CO.,. 

Bankers and Brokers. 

Suite No. 14, Chapin Block. 

Buffalo, N. Y., September 7th, 1901. 
FORTUNES IN OIL. 
Dear Sir : 

Oil is the greatest money-making commodity in America, being 
shipped all over the world. Oil has purchased control of the largest 
railroads, and owns many of the largest banks and trust companies. 
It has made hundreds of men who were once poor, its wealthiest 
magnates. 

The stock of THE BUFFALO OIL CO. is now one of the 



264 GOLD BRICKS OF SPECULATION 

leading stocks, and is, withont question the BEST INVESTMENT 
OFFERED TO THE AMERICAN PUBLIC TO-DAY. This 
Company offers a high-class safe investment to any person or 
trustee with funds to invest. THE BUFFALO OIL COM- 
PANY'S land holdings, owned absolute with perfect title, are as 
large and valuable as any Two ]\Iillion Dollar Company, while their 
capital is only $300,000, with half converted to the treasury. The 
Well on Block 37, of Spindle Top, is down to the cap rock, with 
an EIGHT-INCH PIPE. It will be a " GUSHER " within ten 
days from this date, barring accident. THEN NO MORE 
STOCK WILL BE SOLD. If you want to get in on the ground 
floor of the best investment vou ever made in your life, YOU 
MUST SUBSCRIBE NOW.' The more shares^ you take now, 
the greater will be your income and profits. WE GUARANTEE 
THE PAR VALUE OF THIS STOCK to you, and also TWO 
PER CENT MONTHLY DIMDENDS, and the Stock now sell- 
ing at twenty-five (25) cents per share will all be taken inside of 
ten davs when all transfers of stock or re-sales will be made at 
$1.00 PER SHARE OR OA'ER. 

You thus will be in a position to REALIZE YOUR MONEY 
FOUR TIMES OVER, should you desire to sell out your holdings, 
as the price of this stock will ABSOLUTELY BE ADVANCED 
TO ONE DOLLAR PER SHARE, when the " Gusher " is under 
way, in about ten days. 

We recommend this as the best investment in the market to-day. 
We only handle the stock of Oil Companies owning property on 
Spindle Top at Beaumont, Texas, who have drilled, or are now 
drilling. Spindle Top now has thirty-three (33) " Gushers " pro- 
ducing 1,500,000 barrels of oil per day. The stocks of Companies 
having '' Gushers " on Spindle Top are now selling from ONE 
DOLLAR TO TWO HUNDRED DOLLARS PER SHARE. 
They are making FORTUNES for their stockholders. 

Become a stockholder now in the Buffalo Oil Company of 
Texas, and pave the way for your Future Fortune. The greater 
your holdings, the greater your profits will be. 

$ 50.00 will buy 200 shares now ; selling for $200 in about 10 days. 
100.00 will buy 400 shares now ; selling for $400 in about 10 days. 
200.00 will buy 800 shares now ; selling for $800 in about 10 days. 

Order at once. Send remittance in the usual way. Our Allot- 
ment is being rapidly sold. Buy before the advance on present 
price takes place. Yours very truly, 

Applegate, Lohr & Co. 



THE " SUCKER " LIST 265 

The following slip was received with letter dated Sep- 
tember 7, 190 1 : 

SUBSCRIPTION BLANK. 
APPLEGATE, LOHR & CO., 

Suite 14, Chapin Block, Buffalo, N. Y. 

1901. 

DiCAR Sirs : Enclosed find Dollars ($ ) 

for the purchase of Buffalo Oil Company Stock at 25 cents per 
share. Principal guaranteed, and 2 per cent monthly dividends 
with pro rata participation in profits. Stock Certificates and printed 
receipt to be sent to my address below. 

Name 

Address 

$50 buys 200 Shares, $100 buys 400 Shares, $200 buys 800 Shares. 



APPLEGATE, LOHR & CO. 

New York, Sept. 2y, 1901. 

UNITED STATES STEEL STOCK— POOL NO. 2. 
Dear Sir : 

President Roosevelt's determination to follow closely the policy 
of our late lamented President AIcKinley, has established the great- 
est confidence. The Stock Alarket for the past week has been 
ascending, and the outlook indicates that we are at the beginning 
of a BIG BULL ^MARKET. The booni is commencing, and now 
is the time to invest money in stocks to make good profits. 

We sold out our allotment of stock in the BUFFALO OIL CO. 
The price has been doubled, as predicted, and we have no more 
shares for sale. Each investor made 100 per cent. We will have 
other opportunities for quick profits in Oil and Mining Stocks in 
the near future, but have nothing in this line to offer just now. 

UNITED STATES STEEL STOCK. 

There is now a Tremendous deal pending in L^. S. Steel Stock, 
regarding which we have the most important information from very 
reliable sources. This stock held firm through the recent situation 
caused by the assassination of President ]\IcKinley, and has since 
advanced rapidly. The manipulation of this stock will be on the 
giant scale, and we will be posted. The deal will be extended to 
Oct. 20. 

A conservative estimate of the profits to he derived in this short 



260 GOLD BRICKS OF SPECULATIOX 

'' deal " running only for one month, is set dozi'n by its at 200 per 
cent elear over and above all eoniniissions and expenses. 

If you are satisfied with such a handsome return on your money, 
we advise you to invest heavil}-. 

On receipt of your deposit of $100 or upward, we will send 
you a written guarantee of your principal, and agreement to carry 
the stock down to 10 per cent margin in case of a drop in the market. 

All profits will be adjusted on October 20th, when each client 
will receive full settlement of his account, both principal and net 
profits. 

We consider this the safest and best investment in the Stock 
Market to-day, ivhere 200 per cent can be made in four "weeks' 
time zvith PRIXCIPAL GUARAXTEED, and zee adz'ise invest- 
ments of $200, $^00 or $1000, as tJiis is the best chance you zvill 
have in a long time. A'ery truly yours, 

AppLECiATE, Lour & Co. 



The following slip was received with the above letter: 

U. S. STEEL STOCK.— POOL NO. 2. 
APPLEGATE, LOHR & CO., 

203 Broadway. New York, N. Y. 

1 901. 

Gentlemf.n : I enclose ($ ) Dollars. 

to be invested in your U. S. Steel Stock Pool, No. 2. according to 
your best information and discretion, it being understood that you 
are to protect mv account to 10 per cent margin, and GLWRAN- 
TEE MY PRINCIPAL, and that the deal is to close on October 
15, when my principal and profits are to be remitted to me in full, 
less your commission of 20 per cent. 

Signature 

Town 

State 



Introduction.. 

THE PEOPLE\S EINANCIAL NEWS CO., 

29 P)road\vay. 

Room 81. 

^ ^ New York, Julv 2^, 1901. 

Dear Sir: j . d y 

The' break in the stock market for the past few days was again 

caused by the manipulation of a " Pool " who have been at work 



THE " SUCKER " EIST 2(;)7 

for some time, accumulating- all the stock that was offered in a 
certain low-priced railroad. Their orders are to buy 150,000 shares, 
and there is positively no doubt that such a big purchase will cause 
an advance in the shares from $30 to $40. 

We have connections with one of the most prominent and influ- 
ential houses on'W^all Street, and they have orders to buy all the 
stock that is oft'ered, and they wall carry a limited number of shares 
for us on a 2 per cent margin, and protect in full — that means no 
remargin. No one here knows anything about this deal, except 
the people connected with it. 

Wishing to introduce ourselves to you, and to increase our list 
of subscribers, we make you the following liberal offer : 

If you wall send us $10 w^e will furnish you the information on 
tliis stock, keep you posted on all its movements, and the $10 you 
send us for this information, we will invest in the stock with the 
rest of the subscribers. As the stock will become very active and 
its fluctuations will be wide and rapid, we will therefore be able to 
make a great many quick and profitable turns, and your investment 
should show a good profit. At the end of the deal we deduct 20 
per cent of the net profits, and mail you N. Y. Draft for balance 
due you; besides we will mail you every day at 4 p. m., for 30 
days, our Market Letter, giving you what stocks to buy or sell for 
immediate profits, with wire service on all " Cliqued " and manipu- 
lated stocks if necessary. W^e will also give you daily, all transac- 
tions made on the New York Stock Exchange from 10 a. m. until 
3 p. m., giving the number of shares, and prices of each and every 
transaction as made. Bond sales from opening until closing, 
Boston Stock Market, Philadelphia Market, Curb Market, giving 
bid and asking prices on all securities dealt in on the curb ; Chicago 
Grain and Provision Market, Cotton Market, Government Bonds, 
Foreign Financial, Money and Exchange and all of the latest finan- 
cial news up to 3 p. m. 

If you are interested in the Stock Market, this is very valuable 
information, as you can at all times see whether your orders to your 
brokers have been properly executed. If you have lost any money 
in the Stock Market and wisli to make good your losses or should 
you wish to increase your income, you should not miss subscribing 
to our introductory ''Special." Cut off the heading of this letter 
marked " Introduction," and mail it with your subscription. 

All orders to this '' Special " must be in by July 31st. 
Yours truly. 

The People's Financial News Co. 



268 GOLD BRICKS OF SPECULATION 

THE PEOPLE'S FIXAAXIAL NEWS CO. 

Good for j% Extra Margin. 

New York, August Qtli, 1901. 
Dear Sir : 

We gained information through our position as Financial News 
Co. of a stock that will move from 20 to 30 poijits. This comes 
from the most reliable source on the Street. The pool on this stock 
was formed some time ago; operations have been deferred owing 
to drought in the Corn Belt and the Steel Workers' Strike, but as 
the situation has now changed for the better, the deal will be made, 
and for the benefit of subscribers and correspondents who did not 
get into our Introductory and Special, and wish to make a profitable 
turn on a small investment, we will handle a limited number of 
shares of the stock, therefore send you this letter advising you of 
the deal. 

$ 20 will control 10 shares of the stock estimated profit $ 200 
40 will control 20 shares of the stock estimated profit 400 
60 will control 30 shares of the stock estimated profit 600 
80 will control 40 shares of the stock estimated profit 800 
100 will control 50 shares of the stock estimated profit 1000 
200 will control 100 shares of the stock estimated profit 2000 
We are so confident that this deal will be successful that we will 
protect all orders with 3% extra margin should the stock decline 
while the deal is on. Besides, we will protect each subscriber's 
investment against loss by issuing to each customer a certificate of 
stock made out in his own name, the number of shares will be to 
the amount of his investment, with the understanding that the 
stock must be returned to us at the end of the deal and satisfactory 
settlements have been made. This stock is full paid and non- 
assessable and will pay a dividend of 6%. All the subscribers will 
receive the name of the Stock and be kept posted on all its fluctua- 
tions, together with our daily report of all financial matters up to 
3 p. m., giving 2 or 3 other stocks every week for immediate profits. 
This is a special offer and exceptional opportunity to make a 
quick and profitable turn and you should not miss it. If you are 
not interested in the Stock Market, please hand this letter to some 
friend who might wish to make the turn. Cut off the heading of 
this letter and mail it with your order. 

All orders to this deal must be in by August 20th. 
Respectfully yours, 

The People's Financial News Co. 
P. S. — ^^Vite for reference and further information. 



THE " SUCKER " LIST 269 

OCTOBER SPECIAL. 
THE PEOPLE'S FINANCIAL NEWS CO. 

New York, Oct. 2, 1901. 
Dear Sir: 

We are pleased to announce to our subscribers and correspond- 
ents the successful closing of our " Introductory Special ", and by 
request of a number of correspondents who did not get their orders 
in on time to handle small investments for them, we have decided to 
do so provided we can get 100 subscribers at $10 each, to join in our 
October Special deal. We do not run any special deals unless we 
get information on a sure thing, and we are pleased to say that 
we feel confident that we again have the Stock that will show big 
profits to all who join us in our October Special. 

We gained information through our position as. a Financial 
News Company, in regard to the conference held on J. P. Morgan's 
yacht at Bar Harbor, Me., on Monday the 19th of August. This 
was one of the most important meetings ever held by Railroad 
Bankers, and the subject was to form a Pool on a certain low-priced 
stock. The stock in question was for several years one of the most 
active stocks on the New York Stock Exchange ; more shares were 
handled in one day than of any other stock in the history of the 
Exchange. 

Wishing to further introduce ourselves to you as well as to 
increase our list of Subscribers, we again make you the following 
liberal offer : 

If you will send us $10 we will furnish you the information on 
this Stock, keep you posted on all its movements, and the $10 you 
send us for this information, we will invest in the Stock with the 
rest of the Subscribers. The Stock will become very active and a 
great many quick and profitable turns can be made and your invest- 
ment should show a fair profit. At the end of the deal we deduct 
20% of the net profits and mail you New York Draft for balance 
due you ; besides we will mail you every day at 4 p. m. for 30 
days our Alarket Letter, giving you what other stocks to buy or 
sell for immediate profits, with wire service if necessary on all 
cliqued and manipulated stocks. We also give you daily, all trans- 
actions made on the New York Stock Exchange from 10 a. m. to 
3 p. m., giving the number of shares and price on each and every 
transaction as made. Bond Sales, from opening until closing, Bos- 
ton Stock ]\Iarket, Philadelphia IMarket, Curb Market, giving bid 
and asking prices on all securities dealt in on the Curb Market; 



270 GOLD BRICKS OF SPECULATION 

Chicago Grain and Provision ^Market, Cotton Alarket, Government 
Bonds, Foreign Financial, jNIoney and Exchange, and all the latest 
financial news up to 3 p. m. If you are interested in the Stock 
Market this is very valuable information, as you can at all times 
see whether your orders to }our brokers have been properly exe- 
cuted. If you have lost any money in the Stock Market and wish 
to make good your losses, or should you wish to increase your 
income, you should not miss subscribing to our October Special. 
Cut off the heading of this letter marked " October Special ", and 
mail it with your order, as the October Special is positively only for 
our Correspondents whose names appear on our list of Speculators. 
All orders to the October Special must be in by October 9, 1901. 
Yours truly, 

The People's Financial News Co. 



THE PEOPLE'S FINANCIAL NEWS CO. 

New York, November 13, 1901. 
Dear Sir : 

In our capacity we frequently learn of opportunities of extreme 
importance, as in the case of St. Paul, which we had for $20 per 
share. We also had Metropolitan St. Ry. for $16.50 advance within 
the last ten days. 

We don't have " good things " every day, or every week, but 
we now have one that " We feel is absolutely certain." The stock 
in question was, several years ago, one of the most active stocks 
on the New York Stock Exchange. There is now a big pool being 
formed in the stock, and orders have been placed for the purchase 
of 250,000 shares, and there is positively no doubt that such an 
immense purchase will cause an advance in the price of stock of 
from $30 to $40 per share. Our information comes from the most 
reliable source in Wall Street, and the people connected with the 
pool are bound to make a great success of the deal. 

Here is a chance of a lifetime, where a few hundred dollars' 
start is likely to make a fortune, or $10 earn a few hundred. Wish- 
ing to further introduce to you, as well as to increase our list of 
subscribers, we make you the followmg liberal offer for our Novem- 
ber Special. 

If you will send us $10 we will furnish you the information on 
this stock, keep you posted on all its movements, and the $10 sent us 



THE " SUCKER "LIST 271 

for this information, we will invest in the stock with the rest of 
the subscribers. 

We want to place lOO subscribers in our November Special at 
$io each, w^hich will give us $i,ooo with which we can handle 500 
shares of the stock at a 2% margin, and a change of $40 per share 
on 500 shares would give us $20,000 on the $1,000 invested which 
would be divided among the 100 subscribers, giving each subscriber 
a pro rata profit of $200 on his investment in our November Special. 
Besides, we will mail you our daily market letter every day for the 
balance of the }ear, giving you two or three stocks a week for a 
profit of from 3 to 5 points, wire service if necessary, and all the 
very latest financial news to 3 p. m. 

This is, in our opinion, the greatest opportunity offered for a 
long time to make a quick and profitable turn on a small invest- 
ment. Should any of our subscribers wish to invest a larger amount 
outside of our November Special, we wall accept from $50 and 
upwards for which we will charge 20% of the net profits. Cut off 
the heading of this letter, mark it " November Special " and mail 
it with your order. 

• References as to our responsibility furnished on request. All 
orders for our November Special must be in by November 23d. 
Respectfully. 

The Peopi.e's Financial News Co. 



THE PEOPLE'S FINANCIAL NEWS CO. 

New York, November 23, 1901. 

Mr. . 

Dear Sir : 

Your name appears on our list of speculators from your city. 
Wishing some one to represent us in Chicago, we therefore write 
you, whether you would be in a position to represent us. If not, 
perhaps you could refer us to some one that could do so. We allow 
a liberal commission on all new business. 

An early reply would be appreciated. We will have one of the 
most active stock markets Wall Street ever witnessed, and the op- 
portunities to make quick and profitable returns on small invest- 
ments never have been better in the history of the Street. 
Respectfully, 

The People's Financial News Co. 



272 GOLD BRICKS OF SPECULATION 

HENRY L. McCAULEY & CO., 

Dealers in 

Stocks, Bonds and High-Class Investment Securities. 

32 Broadwav, _ _ _ New York. 

' Cable Address : " HYLMAC "— New York. 
Long Distance Telephone : 4490 '' Broad '". 

o 

To All Clients and Correspondents : 

SPECIAL "CASH" OPERATION NO. 17 B. 

PAYS A DIVIDEND OF i6y2% NET. 

(This operation ran 24 days.) 

HEREWITH we hand all Clients in above named Operation, 
statement of account and check for profits (amounting to i6^% 
NET on the investment). 

We trust same will meet with your approval, and beg to assure 
you that every effort will be used by us to make these accounts as 
profitable as is possible under our SAFE PLAN of trading. 

It is perhaps unnecessary to further praise the worth of our 
method of handling the funds of clients. The regularity of earn- 
ings, prompt reniittances and business-like methods of treating one 
and all, have won for us a name of which we are justlv proud. 

FORTUNES HAVE BEEN MADE on this plan 'of trading— 
our richest financiers — (Russell Sage, Henry Clews, J. P. Morgan 
and manv others invariably buv stocks OUTRIGHT FOR CASH, 
just as we do)— but HENRY L. McCAULEY & CO. are pre- 
eminently the " Pioneers " in applying these sound sense business 
rules to Co-operative Investment — and are entitled to all the credit 
due from its success. 

OURS IS NOT A SECRET BUSINESS. 
E\T.RY CLIENT KNOWS JUST WHAT WE ARE GOING 

TO DO WITH HIS MONEY. AND W^HEN WE DO IT. 

THEN HE CAN WATCH OUR PREDICTIONS 

COME TRUE AND SEE HOW WE 

EARN HIM MONEY. 

Our methods are those in use by the largest and most prosperous 
Banking Houses in the -world. They do not trade on '* margins ". 
neither do we. That is " speculative gambling " in which the trader 
merely bets that the price of shares will rise (or fall), and if he is 
wrong — he loses. 

BEWARE OF "GET-RICH-QUICK" CONCERNS.— Do 



THE " SUCKER " LIST 273 

not be misled b} so-called " Hankers and Brokers '■ who promise 
you 200% to 300% a month, and then, after getting your money, 
either ignore your existence entirely or write you that it was lost in 
margin trading. 

IXVESfuiATE OUR STANDING THOROUGHLY. 

We are here to stay and will gladly furnish unexcelled Banking, 
Gommercial and personal references. We do not " gamble " with 
clients' money, but " invest " it carefully in shares that have an 
intrinsic worth even greater than the price we pay for them. 

Our intimate association with men who know wdiat is being 
done, enables us to learn what is intended regarding certain stocks. 
This helps us to forestall the movement of the market in our pur- 
chases, and secure a profit through the advance that follow^s. The 
investment is ahvays safe and free from danger of loss, because we 
buy. the shares outright for cash. 

If you are not already a client of ours, become one immediately. 
Let us invest your idle funds where they will bring good sized, 
steady profits and always be subject to your orders. 

Do not " gamble " on margins. Place your money in our Special 
" Cash " Operations, w^here it cannot be lost, and is sure to earn 
an income. 

We begin trading for account of 

SPEaAL "CASH" OPERATION NO. 25, 

ON MONDAY, NOVEjMBER 18TH. SUBSCRIPTIONS TO 

SAME WILL BE RECEIVED UP TO AND 

INCLUDING THAT DATE. 

We have authentic information of the immediate future of a 
low-priced stock, in which we will invest for account of Opera- 
tion No. 25. 

All trades \vill be reported as made, and at the close of the deal 
(in about three weeks) both principal and profits will be held sub- 
ject to Clients' orders. 

DO NOT FAIL to send us at least $100 for this transaction. 
If you can send $500 to $1000 you w'ill earn proportionately that 
much more. 

YOU CAN NOT LOSE. WE HAVE BEEN CONDUCT- 
ING THESE DEALS SINCE JANUARY iST, 1901, AND 
NEVER LOST ONE DOLLAR FOR ANY CLIENT. 

WE HAVE PAID PROFITS RANGING FROM 
5M% (ON A ONE WEEK'S DEAL), TO 29% 
ON A FOUR WEEKS' DEAL. 
EVERY OPERATION HAS PAID A PROFIT. 



27i GOLD BRICKS OF SPECULATION 

We enclose subscription blank. Please fill out same and return 
to us with your remittance, to reach us not later than Monday, 
Nov. 1 8th. If you cannot send funds to reach us on that date, 
wire (at our expense) stating amount you are sending, and we will 
reserve a place for you to that extent in Operation No. 25. 
Yours respectfully, 

Henry L. McCauley & Co., 

32 Broadway, New York. 



WE HAVE NEVER LOST ONE DOLLAR EOR ANY 
CLIENT UNDER THIS PLAN OF TRADING. 



W^E ARE THE ONLY HOUSE THAT MAKES 

A SPECIALTY OF 

C O - O P E R A T I \^ E I N \^ E S T M E N T 

ON A " CASH •' BASIS. 



EVERY DOLLAR SENT US IS PLACED WHERE IT WILL 

EARN THE GREATEST RETURN WITHOUT 

RISK OF LOSS. 



READ THIS CAREFULLY, 
Then Send for Full Particulars and References. 



McCatiley's remittance slip was as follows : 

IN VES TMEN T DEPART MEN T. 
SPECIAL "CASH" OPERATIONS. 

1 90 1 . 

To HENRY L. McCAULEY & CO., 

No. 32 Broadway, New York. 
Gentlemen : 

Herewith find funds in amount $ for investment 

in your SPECIAL " CASH " OPERATIONS, in such manner as 
you deem best for our mutual interests. I agree to allow you ten 
per cent of the net profits made for my account. 

Both principal and profits are subject to withdrawal at the ter- 
mination of any Operation in which my funds are employed. This 



THE " SUCKER'' LIST 275 

investment to continue for months, unless other- 
wise ordered. 

Name 

Address 

(reinvest) 

Please Profits. 

( remit ) 



In ^iddition to the concerns whose letters are ptibUshed 
this gang- oj^erated under the names of Bramwell & Co., 
Bankers and Brokers; Raymond, Clark & Co., Bankers 
and Brokers, and several others. Their scheme was ap- 
parently to run each concern about sixty days, get what 
money they could from the would-be ''investors" and 
then disappear from their office. The most novel part of 
their operations was the establishing of a collecting, credit 
and reporting agency, for the purpose first of making- 
favorable reports on the concerns and later, after they had 
swindled the '' investor," to obtain from him all his docu- 
mentary evidence, ostensibly for the purpose of coUeeting 
from the szvindler, but, in fact, to destroy the evidence. 

The " Agency " was operated under the name of Ernest 
L. Bennett & Co. 

Their form of general introductory was as follows : 

ONCE OUR CLIENT, ALWAYS OUR CLIENT. 
Chicago. St. Louis. New York. Philadelphia. Boston. 
ERNEST L. BENNETT & CO., 
i8i Broadwav. 
COLLECTIONS AND CREDIT REPORTS. 
Reports on the Financial Standing and Reliability of FIRMS, Cor- 
porations and Individuals, Dealing in RAILWAY, INDUS- 
TRIAL and MINING STOCKS, BONDS, INVEST- 
MENTS, SECURITIES, Etc., a Specialty. 
Collections made for five per cent of amount actually collected. 
No collection — No charge. 
Telephone : 425 Cortlandt. 



276 GOLD BRICKS OF SPECULATION 

New York^ Oct. lo, 1901. 

VERY ni PORT ANT TO YOU. 
Dear Sir : 

One of the most important things for investors to consider is 
whether the firms now corresponding with them are reHable. To 
this end, we ask you to co-operate with ns, and in order to aid you, 
we will undertake to give you ONE FREE REPORT on any con- 
cern or individual now sending you circular letters soliciting your 
investments with them. 

Send us the names and addresses of any firms who are now 
sending you their literature, and send us copies of the circulars and 
prospectus, etc., thev send vou, and we will, in return, send vou ONE 
FREE REPORT AND TELL YOU WHETHER THEY ARE 
HONEST AND RELIABLE AND OF SOUND FINANaAL 
STANDING, OR NOT. This is co-operation. We know these 
people who are sending out " Fake *' literature broadcast, and can 
post you. There are, of course, reliable and responsible firms doing 
a perfectlv legitimate business, and it is to vour advantage to 
KNOW AVITH WHOM YOU ARE DEALING. W^E KNOW. 
YOU DO NOT. Therefore, co-operate with us, and send us copies 
of the circulars you are receivmg, and in reciprocation, we will 
send you ONE FREE REPORT. Additional reports, $1.00 each. 

Kindly let us hear from you. 

Yours very truly, 

Ernest L. Bennett & Co. 

An inquiry as to the standing of August Zimmerman 
& Co. brought the following reply : 

Dear Sir : 

jMessrs. August Zimmerman & Co., about whom you inquire, are 
in good standing and financially responsible. The senior member of 
the firm is reputed to have a wide knowledge of market conditions. 
Very truly yours, 

Ernest L. Bennett & Co. 

Upon the failure or disappearance of one of the con- 
cerns operated by this gang, the parties who had been 
swindled would receive a letter as follows : 



THE " SUCKER " EIST 277 

New York, 1901. 



Dear Sir : 

We have sent you quite a number of circulars during the past 
few months and desire to call your attention once more to our new 
and successful method of enforcing collection of claims against 
firms doing a " discretionar\- " business in stocks, investment secur- 
ities, etc. 

FUNDS INVESTED NOW. 
If you have an account at present with any brokerage firm, and 
have reason to believe you are not receiving fair treatment, or if you 
wish to withdraw your account now, write us and we will collect 
the amount for you, charging only 5% on the amount we actually 
collect. Our services are invaluable in such cases. We are on the 
spot. You are far awa^■. 

REPORTS. 
We also furnish reliable reports on the financial standing and 
responsibility of the brokers dealing in stocks, investment securities, 
COTTON and OIL. We will furnish you with one report free; 
each additional report will cost you $1.00. Send for a free report 
on any firm you wish, and same will be forwarded to you promptly 
in due course of mail. 

Always ready to serve you, we are, 

\'ery truly yours, 

Ernest L. Bennett &: Co., 
Per M. A. INIurray, G. E. L. 

P^inally the police of New Y^ork City took steps to drive 
these swindlers out of that city, as evidenced by the follow- 
ing article, pubHshed December i, 1901 : 

( From the New York Herald.) 

Three men were arrested yesterday on a charge of swindling 
through gne of the most remarkable " profits certain " brokerage 
schemes ever discovered. Their pKmder is estimated by Captain 
Titus as $300,000. 

One novel feature of the many sided plan they are accused of 
using is the organization of a private detective agency, through 
which they obtained the proofs of their swindling from many of the 
victims, and destroyed them under the guise of recovering the 
losses. 



278 GOLD BRICKS OF SPECULATION 

The names of the persons are Frank Dillon, twenty-eight years 
old, who describes himself as a book-keeper, living at No. 205 
Greenwich street, Brooklyn; John F. Barrett, thirty-five years old, 
a stenographer, living at Xo. 593 Bainbridge street, Brooklyn, and 
Henr\' L. JMcCauley, a broker, with offices at Xo. 32 Broadway. 

Dillon and Barrett declare they were merely employes of the 
various firms under the varying names of which the business was 
carried on, and McCauley insists that he only received his mail in 
one of their offices. The police insist, however, that they are three 
of five or six men who carried on the business on an equal footing. 

Detective Sergeants ]\IcConville and Savage and Postoffice 
Inspectors Swift and Ash have been working on the case for a long- 
time. Yesterday morning they found Dillon and Barrett in front of 
X^o. 203 Broadway, and placed them under arrest. In the after- 
noon it was decided to arrest McCaulev and he was found in his 
office. 

Dillon an.d Barrett were arraigned in the Centre street court and 
remanded until this n.iorning, when all will appear for a hearing. 
They spent the night in cells at police headquarters. 

UNDER THE NAME OF BRAMWELL & CO. 

the men are charged with carrying on their operations for about 
two years. The first trace of them was at Xo. 81 New street, in 
1900, where they opened offices under the name of " Bramwell & 
Co., dealers in stocks and bonds." This firm sent out the usual 
circular, referring to rises in stocks and mysterious " deals " con- 
cerning which they had inside information. They promised certain 
profits which would average about $5 a week on an investment of 
$100. These circulars were scattered all over the United States 
and Canada, printed as a type-written letter under an elaborate let- 
ter-head. 

About six weeks later they suddenly disai:)peared, leaving their 
furniture and office fixtures behind them, and instructed the post- 
office authorities to deliver their mail to a letter box which they had 
rented. 

Two months later the firm of August Zimmerman & Co. ap- 
peared at X'^o. 21 Park Row. The idea was the same, and the police 
say they are certain that in this and the other instances the men were 
the same. They disappeared from their offices about two months 
later, again leaving their furniture behind them. 

Then the firm of Lloyd J. Smith & Son appeared at X'o. 55 
Broadway, and after a short life dissolved. The men then organ- 



THE " SUCKER " EI ST 279 

ized the firm of T. \V. Pollard & Co. at Xo. 62 Wall street, which 
lapsed after a life of one month. 

Then came the brilliant coup of the series. Under the name of 
E. T. Bennett & Co., they opened a detective and collecting agency at 
Xo. 181 Broadwa}-. With the lists of their dupes in their posses- 
sion they sent out a circular letter in which it was stated that they 
had full information of the doings of the various firms through 
which money had been lost, and upon recei])t of all proofs and a fee, 
would guarantee to recover the losses in full. 

THUS RECON'ERED EVIDENCE. 

By this device, they not only made money, but recovered the 
greater part of the evidence against them. The fees w^ent the w^ay 
of the other plunder, and the documentary evidence w'as destroyed. 

After this ruse had served its purpose, the men opened offices at 
Xo. 38 Park Row, as Potter, Fairchild & Co., bankers and brokers, 
and leading investors to believe that the senior member of the firm 
was j\Ir. Frederick Potter, the owner of the building. 

This firm they used as a reference in some of their other deals, 
and there were others used in the same way, which Sergeant ]\Ic- 
Conville believes w^ould ultimately be used for the same purposes as 
the others — to swindle investors. 

Through a chain of correspondence among these firms and in- 
vestors they gave the impression that they were reputable brokers, 
and in several instances claimed membership in the Xew^ York Con- 
solidated Exchange. 

Among these firms were Solomon & Rothschild, which they say 
was selected because it included the names of a wise man and a 
wealthy man : Applegate, Lohr & Co., Xo. 203 Broadwa}-, and 
Frank \\\ Carlisle & Co., Broad Exchange Building. They also 
used the name of J. F. Barrett and Raymond, Clark & Co. 

In no case did any of these firms bother to correspond with a 
victim after his money was in their possession. As soon as the 
alluring circulars had convinced the dupe, and his savings of one or 
two hundred dollars were enclosed to the firm, he was shut off from 
all further communication. As soon as danger threatened the firm 
passed out of existence, and by the simple means of moving their 
offices and changing their name they continued to hunt for further 
victims. 

C. W. YATES ACCUSED. 

C. W. Yates, who was arrested in September while doing busi- 



280 GOLD BRICKS OF SPECULATION 

ness under the name of Alex. J. Thurman & Co., at No. 50 Broad- 
way, and discharged for lack of evidence, is declared by Sergeant 
McConville to have been a member of the syndicate. 

Barrett is niarried and lives in a three-story stone house. He 
has carried a large account with the Williamsburg Trust Company, 
and still has a balance there. The men are said to have spent their 
plunder as rapidly as they got it in fast living in the Tenderloin. 

The latest venture was to organize the firm of Schwackenberg 
& Phillips, wholesale produce and commission merchants, at No. 309 
Washington street. They sent out elaborate circulars to produce 
and poultry raisers on November 10, offering 50% more than the 
market prices. Large quantities of goods were shipped to them. 
The bills of lading were easily sold, and they pocketed the pro- 
ceeds, while the shippers waited in vain for returns. 

The mail addresses of several of the disappearing firms are given 
as Potter, Fairchild & Co., Postoffice box 189; E. L. Bennett & Co., 
Postoffice box No. 1775; Applegate, Lohr & Co., Postoffice box 
No. 1814. 

In the mass of circulars and letters in the possession of the 
police, are two or three which show a connection between the 
brokerage firms and the detective agency. With these and the 
testimony of victims who will be asked to come to New York, Cap- 
tain Titus expects to obtain a conviction. 

The police, however, did not reach the principals, whose 
operations continued well into 1902, but on a cheap scale, 
as shown by the letters of the '' People's Financial News 
Company," which resumed at 60 Broadway, in January, 
1902, and was willing to accept $5 for investment in its 
'' January Special." 

THE PEOPLE'S FINANCL\L NEWS CO., 

18 Broadway, Room 412. 

Removed to No. 60 Broadway, R. 325. 

New York, Jan. 7, 1902. 
Dear Sir : 

\Ve are pleased to again announce the successful closing of our 
December Special, and congratulate all subscribers on the fair 
profits made on their investments. 



THE " SUCKER " LIST 281 

As stated in our previous Circular, that in our capacity we fre- 
quently learn of opportunities of extreme importance as in Reading 
Common, which was good for 18 pts. profit, and Sugar we gave to 
all subscribers for 20 pts. 

We do not have sure things every da>- or every week, but there 
will be some very big movements immediately and we know of 3 
Stocks which will positively advance from 15 to 30 pts. within the 
next thirty days. No such chances for making money rapidly and 
safely will occur again for a long time. 

Wishing to further introduce ourselves to you as well as to in- 
crease our list of subscribers, we make you the following liberal 
offer : 

If you will send us $5.00 we will furnish you with the informa- 
tion on these Stocks, keep you posted on all their movements and 
the $5.00 you send us for this information we will invest with the 
rest of the subscribers in our January Special, besides "we will mail 
you our daily market letter for thirty days, giving all the latest 
financial news up to 3 P. M. 

As the Stocks will become very active with fluctuations wide and 
rapid on both sides, we will operate our January Special on our 
Scalping plan, which is the most profitable on a two-sided market. 
In operating this deal, it takes close attention and constant presence 
at the market to catch (as near as possible) the extreme figures of 
the daily movements of the Stocks we are interested in. For this 
we employ an expert tape reader, who watches every cjuotation as it 
appears on the tape. If the Stock shows signs of weakness and 
there are more Sellers than Buyers, we immediately take profit on 
Long Stock and sell Short. Then again, if the Stock steadies and 
shows that there are more Buyers than Sellers, we take profits on 
the Short Stock and buy for Long account, and by this plan we can 
make from two to three profitable turns a day while the price of the 
Stock may be the same as the day before. We will have one of the 
most active markets Wall Street ever saw and the opportunities to 
make quick and profitable turns on small investments never have 
been better and you should not miss to subscribe to our January 
Special. 

All orders to our January Special must be in by the i6th when 
the books of the January Special close. Remittances are invested on 
receipt of same. 

Awaiting your order. Respectfully, 

The People's Financial News Co. 



282 GOLD BRICKS OF SPECULATION 

THE PEOPLE'S FINANCIAL NEWS CO., 
60 Broadway, Room 325. 

New York, March 5th, 1902. 
Dear Sir : 

In our capacity we frecjuently learn of opportunities of extreme 
importance, as in the case of Copper, which we had for $20 per 
share ; we also had Sugar for $30 advance. 

We don't have *' good things " every day, or every week, but we 
now have one that we feel absolutely certain is good for a quick 
and profitable turn. 

The Stock in cjuestion was, several years ago, one of the most 
active stocks on the New York Stock Exchange. 

There is now a big pool being formed in the stock and orders 
have been placed for the purchase of 300,000 shares, and there is 
positively no doubt that such an immense purchase will cause an 
advance in the price of the stock from $30 to $40 per share. 

Our information comes from the most relia])le source in Wall 
street, and the people connected with the pool are bound to make a 
big success of the deal. 

Here is a chance of a lifetime where a few hundred dollars' 
start is likely to make a fortune, or $10 earn a few hundred. 

Wishing to further introduce ourselves to you, as well as to 
increase our list of subscribers, we make you the following liberal 
offer for our March Special. If you will send us $10, we will 
furnish you the information on this stock, keep you posted on all 
its movements, and the $10 you sent us for this information, we 
will invest in the stock with the rest of the subscribers. 

We want to place 100 subscribers in our March Special at $10 
each, which w^ill give us $1,000, with which we can handle 500 
shares of the Stock at a 2% margin, and a change of $40 per share 
on 500 shares would give us a profit of $20,000 on the $1,000 
invested, which would be divided among the 100 subscribers, giving 
each subscriber a pro rata ])rofit of $200 on his investment of $to, 
in our March Special. 

Besides, we will send you our daily market letter for two 
months, giving you two or three stocks a week for a profit of from 
3 to 5 points, wire service if necessary, and all the very latest finan- 
cial news up to 3 p. m. 

This is, in our opinion, the greatest opportunity offered for a 
long time to make a quick and profitable turn on a small investment. 

Should any of our subscribers wish to invest a larger amount 
outside of our Alarch Special, we will accept from $50 and upwards, 
for which we will charge you no commission until the amount 
doubles, after which we deduct 30% of the net profits. 



THE " SUCKER " EIST 283 

Cut off the heading of this letter, mark it " March Special ", 
and mail it with your order. 

If you have lost any money in the stock or grain market and 
wish to make good your losses, or should you wish to increase your 
income, you should not miss joining us in our March Special. 

Reference as to our responsihility furnished on request. 

All orders to our March Special must be in by March 12th, when 
the books to the deal close. Respectfully, 

The People's Financial News Co. 

If any of my readers have been the recipients of this 
class of '' get-rich-quick " literature, without having- writ- 
ten to a '' fake " concern, and thereby acquiring a place for 
their names on the list of " suckers," they have wondered 
how their names and addresses were procured by the 
" fakers." The search for " suckers " is the '' faker's " vo- 
cation ; he puts a thousand to the test and probably onh^ ten 
will swallow his bait. For the time being the ten victims 
are his friends and he writes them requesting that they 
send him the names of friends and acquaintances '' who 
might be interested in our money making proposition." 

This is the usual form: 

SPECIAL REQUEST. 

You can render your friends or acquaintances a service and do 
us a favor by giving us their names and addresses, as we would 
like to send them our New Book and acquaint them with the com- 
plete facilities which we provide to dealers in Stocks and Grain. 
Any communication from you will be treated in confidence. We 
thank you in advance for any consideration which you may give 
our recjuest. 

Name. Street. City. State. 



Employes of business houses having an '' out of town " 
trade are often bribed to furnish the names of the persons, 
apparently well to do, who correspond with the house and 



284 GOLD BRICKS OF SPECULATION 

have business relations with it; thus the " faker " is assured 
that his '' sucker hst " is made up of the addresses of none 
other than persons who are reasonably prosperous. In this 
and other ways a " sucker list " is built up, every State in 
the Union being represented. 

Frequently I have known of a '' faker " being prac- 
tically " broke," but by reason of his having a fine '' sucker 
list " as an asset, he w^ould succeed in getting capital to 
back him in re-establishing himself in " business." 

The value of a " sucker list " may be best understood, 
when we consider that although the grain, potato, hay or 
cotton crop may fail, the crop of " suckers " is not dimin- 
ished by hot winds or cold rains, but runs from a fair 
average to an abundant crop every year. 



THE ''PAKE'' MERCANTILE AGENCY 285 



CHAPTER IV. 

THE ''fake'' mercantile AGENCY AND OTHER REFERENCES. 

Misleading the public by referring- to Mercantile Agencies and Com- 
mercial Bureaus established to sell laudatory reports, regardless 
of facts ; two agencies exposed ; copies of their reports ; the 
truth as to persons reported upon. 

For several months during 1902 and 1903 the Sunday 
editions of the leading Chicago papers ran the following 
'' ad " on their financial pages : 

Buy Wheat and Corn Now 

$100.00 margins, 5,000 bushels 2c. 2C advance 
doubles your money. Send for Booklet, " How 
to Invest Successfully," and Market Letter. Sent 
free. 

EVERINGHAM & COMSTOCK, 

Suite 32, Commerce Bldg., Chicago. 

An answer to the " ad " brought a prompt reply con- 
sisting of three stereotyped letters, the booklet '' How To 
Invest Successfully " and a card purporting to be a 
copy of a letter of thanks for profits made. Here is an 
exact facsimile of the card: 

LaGrange, 111., July 2nd, 1902. 
Messrs. Everingham & Comstock, 

32 Commerce Bldg., Chicago. 
Dear Sirs : 

Your favor of the 30th with % purchase and sale of 20,000 
bu. of July Corn and check for $1873.58, margin $500, profit 
$1373-58 received which I find correct. I wish to thank you for 
the information you gave me and regret now that I did not take 
your advice to buy more and hold for a larger profit, but, neverthe- 
less, I am well satisfied with what I made and if at any time I can 
speak a good word for you, I will be pleased to do so. 

Very truly vours, 

F. M. Arnold. 



286 GOLD BRICKS OF SPECULATION 

Now, it happens that La Grange, 111., is a suburb of 
Chicago, twelve miles out on the Chicago, Burlington & 
Quincy Railroad; that F. M. Arnold was a well-known 
character previously connected with bucketshops and later 
business solicitor for the concern of Everingham & Corn- 
stock, and that he had never been accused of having $500, 
let alone $1,873.50, and that Everingham & Comstock 
commenced business July i, 1902. Hence Arnold's '' fake " 
letter was one of their principal assets with which to start 
business. One of the printed letters which accompanied 
the card spoke for itself and required no comment, except 
that it failed to mention the possibility of loss. It read as 

follows : 

Chicago 1902. 

Dear Sir : 

Being aware that you are at times interested in the Board of 
Trade Markets, we wish to call your attention to the following : 

$100 will buy 5,000 bu. of Wheat, Corn or Oats and margin the 
same two cents a bu. An advance of two cents from purchase price 
will double your money. The markets are now offering a good 
opportunity for investments. Quick returns and good profits can 
be made by investors who are willing to take a small risk by buying 
on the breaks in the market, and selling on bulges. 

We get the best of information as the enclosed card will show. 
We believe if you will send in the above amount, or more, with 
instructions for us to buy on any break, or when we think best, and 
sell at a 2c advance, that it will be the best investment and pay you 
a larger percentage on amount invested than you ever hoped for. 

We are a reliable and legitimate commission house and work for 
the interests of our clients. Send for our free market letter and 
" book on speculation." 

We can also trade in fractional lots. $20 margins 1,000 bu. of 
grain 2c per bu. Very truly yours, 

Everingham & Comstock. 

The references were printed in red ink at the top of the 
letter-head. "Young's Rating Agency, 51, 164 La Salle 
St." was one of them. 

A letter of inquiry addressed to the above Agency 
brought forth the following reply: 



THE ''FAKE" MERCANTILE AGENCY 287 

Chicago, 111., 10/28-1902. 



Dear Sir: 

You can feel perfectly safe in trading with Everingham & 
Comstock. Roth men of good reputations and of marked ability 
in their line. They do not speculate, but do a strictly commission 
business. Consider them worth $125,000. Two banks say of them, 
that thev carr\' good balances and do not ask accommodations. 
Respect' ' YOUNG'S MERC. AGCY'., 

A. D. Young, Prop. 

Inquiry at the office of '' Young's Mercantile Agency " 
resulted only in locating the sign. The information that 
'' Mr. Y^oung called once a day for mail " was gathered 
from other occupants of the office, of whom he rented a 
small room. My failure to locate this enterprising gen- 
tleman was not strange, as his business, according to the 
police department, was extensive and varied, and develop- 
ments were not of a character to inspire confidence in 
Young's Mercantile Agency or its clients. 

The following report of a raid made by the Chicago 
police is interesting and instructive: 

(Chicago Chronicle, Nov. 14, 1902.) 
Detective Sergeant Wooldridge and detectives of the Central 
station invaded the offices of Arthur L. Bradley & Co., 263-265 
La Salle street, yesterday afternoon and arrested L. H. Bailey, the 
alleged proprietor of the concern. Bailey is charged with defraud- 
ing the patrons of the company through a grain speculation swindle. 
Bailey was released upon bonds signed by Ernest E. Jones, a com- 
mission man, 22 Rialto building. 

The police say that Bailey admitted that he was the '' Arthur L. 
Bradley & Co." concern and that he had also been in business under 
the name of R. H. Morrison. Although denied by the prisoner, 
Detective Wooldridge said that he believed Bailey was also the 
proprietor of Young's Mercantile Agency, 164 La Salle street. 
The police say that when prospective investors in the grain specu- 
lating company asked for references they were directed to Young's 
Mercantile Agency. Wooldridge declared that the only material 
part of the agency that he could find was the sign which appeared 
on the doors of the office in the La Salle street building. 



288 GOLD BRICKS OF SPECULATION 

In circulars found in the Bradley offices Young's Mercantile 
Agency spoke of the grain speculating company as follows : 

'* The above company are doing a private banking business, and 
are reputed to be worth from $50,000 to $60,000. Their local repu- 
tation for integrity and fair dealing is Ai. They make a specialty 
of the put and call business, which branch they have operated for 
three years, and they are leaders in this line ; they have a good 
clientele and a thorough investigation has been unable to disclose 
anything to their discredit. 

" On application with two local banks with whom they do busi- 
ness we learn as follows : They carry large balances and thus far 
have asked no accommodations outside of loans upon first-class 
securities. All parties interested sustain good reputation and we 
are in a position to thoroughly indorse them for any obligations 
they may assume. 

" Following is their rating, based upon their latest statement : 
Reputation Ai ; worth $50,000; discount all bills; credit good. 

'* We feel double assurance in recommending the above firm, as 
we have a private knowledge of the conservative way in which they 
handle their business. They do not speculate in any sense of the 
word and can be relied upon to handle all business in a strictly com- 
mission way. Respectfully, 

"Young's AIercantile Agency." 

circulars are confiscated. 

Many hundreds of circulars in which the system used by the 
company in making investments was outlined were confiscated by 
the police. One of them read ; 

** We put ourselves on record with the prediction that May 
corn will go to $1. May wheat will go above $1.50, and if you 
will send us $100 to buy i.ooo bushels of either wheat or corn at 
the market price and another 1,000 bushels on every i cent advance 
until you have accumulated 20,000 bushels you will make about 
$1,980 within the next sixty days. We know whereof we speak 
and we sincerely hope you will have the courage of your convic- 
tions and send the money along. 

" For the small investor who does not care to speculate in the 
regular way the ' puts and calls ' system is a safe plan to insure a 
regular weekly dividend of $6 per week on every $100 invested. " 

Ordinarily such an exposure would put a quietus on 
even a '' Mercantile Agency," but when put to the test 
three wxeks later, another of my agents received the fol- 
lowing report from it: 



THE ''FAKE" MERCANTILE AGENCY 289 

CiiiCAGu, III, Dec. 3, 1902. 



Dear Sir : 

Everingham & Comstock have a good reputation and are in a 
position to handle large amounts. 

From best information we can obtain they stand as follows : 
Reputation good. 
Worth $50,000. 
Pay prompt. 
Credit good. 
They do not belong to big Board of Trade but have a good con- 
nection there. Respect., 

Young's Merc. Agcy. 

The truth, which will be apparent to every reader, was 
that Everingham & Comstock and Young's Mercantile 
Agency were scheming to get the money of would-be spec- 
ulators for the purpose of '' losing " it in the good old 
fashion. 

Y^oung's Mercantile Agency seems to have faded away, 
for in July, 1903, Everingham & Comstock had changed 
their '' reference," and their letter-heads bore the follow- 
ing inscription, printed in red ink at the top of the sheet: 
Reference: The International Credit Bureau Co. 

A person who had received a letter from Everingham 

& Comstock was prompted by curiosity to write to the 

" reference " as follows : 

Chicago, August 27, 1903. 
The International Credit Bureau Co., 

Chicago. 
Gentlemen : 

I have been receiving some mail from Everingham & Comstock 
and I notice that they refer to you as their reference. Now, I am 
thinking of investing a little money about the first of September and 
I don't want to run into any of these get-rich-quick companies, be- 
cause I don't want to give my money away but want to make some 
more on my investment. Do you think it would be safe for me to 
trust them with fifty dollars ? Please let me hear from you soon, as I 
want to find a good commission man before the first of the month. 

Yours truly, 



290 GOLD BRICKS OF SPECULATION 

He received a prompt reply: 

Chicago, Aug. 29, 1903. 
Mr 

Chicago. 
Dear Sir : 

In answer to your favor we wish to state that we consider 
Everingham & Comstock a rehable firm, as they have been on the 
Board of Trade for twenty years, have a good standing and have 
never been suspended for irregularities. Their capital is small, not 
to exceed $5,cmdo to $10,000, but is sufficient for the amount of busi- 
ness they are doing. 

It is our rule not to answer communications without fee, which 
is 50 cents, but since you wish to make the investment before Sep- 
tember 1st we do so and request you to send our fee in postage 
stamps by return mail. 

Yours very truly, 
International Credit Bureau Co., 

Edward Fleischer, Mgr. 

The above correspondence was handed to nie. I am 
at a loss to express in suitable and polite languag'e my 
contempt for such damnable statements as are given out 
by this " Credit Bureau." 

Let us have the truth : 

Mr. G. S. Everingham, the senior member of the firm 
reported on, was expelled from the Board of Trade a1)0ut 
six years ago, on charges filed by myself. His methods 
ever since have been — to put it mildly — l^ad. Mr. John 
K. Comstock is not a member of the Board of Trade. He 
was for years identified with the bucketshop interests, and 
I have had his mail stopped by the postofiice department 
on three different occasions. So far as their capital is con- 
cerned they may have had all that the " bureau " credited 
them with, although Mr. Comstock had gone through 
bankruptcy scarcely a year before, and al)out the time the 
report was issued I heard of a customer's claim, which 
required a lawyer's aid to collect. 



THE ''FAKE" MERCANTILE AGENCY 21)1 

The request for fifty cents as a fee for giving the report 
is merely a '' bluff," intended to add some little respect- 
ability and dignity to the report. 

Let me take you a little deeper into the methods of the 
International Credit Bureau Co. 

On May 2^^, 1903, the office of the notorious bucket- 
shop of George T. Sullivan (known as '' Red-Letter " Sulli- 
van) located at 259 and 261 La Salle street, Chicago, was 
raided by the police. As soon as he was released, Sullivan 
reopened the office, but on various pretexts refused to pay 
the patrons of his shop to whom he owed hundreds of 
thousands of dollars. His creditors were scattered all over 
the country, and in writing to them he confessed his inabil- 
ity to pay at once, but promised to " soon adjust all bal- 
ances " and referred his creditors to the International 
Credit Bureau Co. as to his standing, etc. 

I have procured a " set '' of the '' Bureau's " reports on 
Sullivan. When read in connection with Sullivan's letters 
to his clients, and with the knowledge that his checks were 
being protested on the day the report was dated, and 
that he for several days had been " paying out " only 
" under pressure," the whole scheme of " fake " references 
is laid bare to the world. I have at my command to print 
side by side with the " Bureau's " glowing reports of Sul- 
livan's financial strength the notice which a customer re- 
ceived that a check of Sullivan's for $100 had gone to 
protest on the same day the report is dated. Sullivan's 
letters of about the same date, from which I propose to 
take extracts showing that Sullivan admitted his inability 
to meet the demand made upon him and was quieting the 
fears of his creditors by referring them to the '' Bureau," 
are also in my possession. To cap the climax, Sullivan's 
affidavit that he was not connected with the concern doing 



292 



GOLD BRICKS OF SPECULATION 



business in his name for some days prior to the giving- out 
of the " confidential report " of the " Bureau " is in my 
hands. 

With the exception of the notice of protest, there is no 
truth in the statements which I now offer as an example 
of the desperate methods adopted by swindlers : 



(Reports of the "Bureau." Sent out 
after May 27. 1903.) 

Chicago, May 25, 1903. 
Special Report. 

We deem it not more than justice 
to notify all of our representatives 
in places where the firm of 
GEORGE T. SULLIVAN CO.. 
Commission. 
259-261 La Salle St., of 
Chicago, 
has a branch office, that after careful 
investigation we find that the inter- 
ference on the part of the Chicago 
police on May 23, 1903, with the busi- 
ness of the firm in Chicago is looked 
upon as a high-handed outrage un- 
warranted by law, and denounced as 
a blackmailing scheme by commercial 
and board of trade members, with the 
exception of a few, whose jealous 
feelings predominate over their better 
judgment. A detailed report of this 
firm as late as April 9, 1903, we will 
cheerfully furnish free of charge to 
you, if any of your constituents 
should wish it. 

We enclose herewith our late cir- 
culars and will be pleased to be at 
your service at any time. 

Yours very truly, 
International Credit Bureau Co., 
Edward Fleischer, 

Manager. 
Dept. Commercial Reports. 

CONFIDENTIAL. 

report on GEORGE T. SULLIVAN. 

261 La Salle St. 
No. 4903. Chicago, April 9, 1903. 

George T. Sullivan has been the 
successor of Rowland & Co. for about 
eight months doing a brokerage 
business in stocks, grain, provisions, 
cotton, and coffee, and is a member 



(Protest Notice, May 27, 1903.) 
State of Illinois, } 
County of Cook, f ^^• 

May 27, 1903. 

Sir: — A Check for $100.00. date 
5/23/1903. Payable Fort Dearborn 
National Bank. Signed by George 
T. Sullivan Co. Endorsed by — Troy 
National Bank, O., and Merchants 
National Bank, Cincinnati, O. 

Being this day due and unpaid, and 
by me PROTESTED for non-pay- 
ment, I hereby notify you that the 
payment thereof has been duly de- 
manded, and that the holders look to 
you for payment, damages, interest 
and costs. 

Done at the request of 
THE AMERICAN TRUST AND 
SAVINGS BANK, 

Chicago, 111. 
[seal] Geo. W. Speich, 

Notary Public. 

To 

Cr. Troy Nat. Bank. 



(Sullivan Letters which give the lie 
to his afUdavit.) 
Chicago, May 28, 1903. 

Mr. 

Troy, O. 
Dear Sir: 

We received your wire to-day to 
send $300 but regret we cannot com- 
ply with your request. You have no 



THE ''FAKE" MERCANTILE AGENCY 



293 



of the Chicago Open Board of Trade. 
He is the largest trader on the 
Board, a small, "wiry" and nervy 
man, called the "Jay Gould" of Chi- 
cago, with a very large clientage, 
and has won for himself a very good 
reputation for prompt and honest 
dealings with his customers. 

He has been in business in Chicago 
three years. He has now 76 branch 
establishments scattered throughout 
the United States, has his own direct 
cable with his New York office, 50 
Broadway, and a large office force in 
this city. It is reported that he has 
cleared over $75,000 since he started 
and that he has purchased a few 
county elevators. 

Board of Trade and La Salle Street 
people generally give him a good 
reputation, and call him one of the 
hardest workers, a man who works 
while others sleep and one of the 
most successful Board of Trade men. 

May 27, 1903. 

Additional investigation made by 
us since the interference on the part 
of the police with the business of 
George T. Sullivan, we find as stated 
in our Commercial Report May 25th, 
that the outrage was instigated by a 
City Police Detective and a man, or 
roustabout, of the Board of Trade, 
neither of whom have a very good 
reputation. 

The Secretary of the Open Board 
of Trade informs us this day that 
Sullivan's balances for margins are 
often very large, but that Sullivan's 
checks are taken by the banks without 
looking up his amounts, the same as 
a certified check. He is prompt in 
his settlements and considered strong- 
er to-day financially than our last 
report. April 9th, made him. 
International Ckedit Bureau Co. 
Edward Fleischer, 

Manager. 
Dept. Commercial Reports. 

{Stillivans Sworn Statement on file 

in United States Court at 

Chicago.) 

Now comes George T. Sullivan, in 

answer to the rule heretofore on the 

17th day of June, 1903, entered upon 



doubt read in the newspapers an ac- 
count of the raid made by Detective 
Wooldridge, on our offices in Chi- 
cago, as well as of Chief of Police 
O'Neill's condemnation of Detective 
Wooldridge's action. 

Immediately following the raid, at- 
tachments were levied upon the prop- 
erty by a creditor, who without 
warning, acted without first making 
demand for his funds. Should we 
succeed in lifting this attachment, the 
run will increase and more attach- 
ments follow. Therefore, w^e deem it 
wise to await the time when we can 
properly release our funds and adjust 
our balance. Pending this it will be 
impossible for us to remit. We hope 
this will not inconvenience you and 
promise you we will do everything in 
our power to make a speedy adjust- 
ment. 

We will continue business as here- 
tofore and solicit a continuation of 
your patronage. We wish further to 
say if you wish to make new trans- 
actions you may operate on the 
credit you have with us at this writ- 
ing. We will agree not to call you 
for additional margin if the market 
goes against you, but will keep all 
transactions good until such time that 
a combined adjustment of all balances 
can be made. 

Yours very truly. 
The George T. Sullivan Company, 
per Geo. T. Sullivan, 
Pres. 
G T S : M 

Chicago, May 30, 1903. 



Mr. — 

Troy, O. 
Dear Sir: 

Your letter of the 28th inst. is re- 
ceived and in reply we beg to say 
that you have done business with this 
corporation for some time and prior 
to this, you have conducted your busi- 
ness with our Mr. George T. Sulli- 
van, and his dealings have always 
proven honest and above board as you 
well know. The disgraceful action 
of one of the City Detectives in mak- 
ing a raid upon our business on Sat- 
urday last (which we have already 
explained to you) brought about 3, 



294 



GOLD BRICKS OF SPECULATION 



him by this honorable court, wherein 
he was ordered to show cause on 
June 24, 1903, wlay he should not be 
attached for contempt of this hon- 
orable court for an alleged violation 
of the injunction heretofore issued in 
said above entitled cause, and says 
that on the 22d day of May, 1903, he 
was not the owner of, nor did he 
either directly or indirectly on said 
last mentioned day, have the control 
or management of the business con- 
ducted at 259 and 261 La Salle St. or 
9138 Commercial Ave. 

***** 

This respondent says that on the 
22nd of May, 1903, he sold and de- 
livered to George T. Sullivan Com- 
pany, a corporation organized and 
existing under the laws of the State 
of New Jersey, all his. this respond- 
ent's right, title and interest in and 
to the property and business owned 
by this respondent in all of the 
ofifices and business hereinbefore 
stated; and that this respondent, 
since the beginning of the 22nd of 
May, 1903, has in no wise been con- 
cerned in the control, management, 
running or conducting of the busi- 
ness in any of the aforesaid offices 
at the aforesaid places. This re- 
spondent further says that he is not 
now, and never has been either an 
officer, stockholder or agent of the 
said corporation nor has he had at 
any time any voice in the control, 
management or conducting of its 
affairs. 

***** 

This respondent further says that 
the negotiations for the sale of such 
interest as he had in the places here- 
inbefore mentioned prior to May 22, 
1903, was made by this affiant to said 
corporation through J. C. Lenney, of 
New York, attorney for said cor- 
poration ; and affiant says that the 
officers of said corporation are James 
H. Irwin, President, and Edward E. 
Cruly, Secretary. 



sensational run for funds and at the 
same time blackmailing attachments 
followed, which has mixed up our 
banking affairs considerably, but we 
are making every effort to straighten 
matters out. We are confident that 
if our clients will be patient for ten 
days or two weeks matters will take 
a decidedly different course and we 
will then be in position to meet all 
demands. We are doing business as 
usual and solicit your trade on your 
present credit balance. 

The more litigation our clients 
cause us, the more time it will take to 
straighten our affairs out, but we 
assure you that we will continue busi- 
ness as heretofore at the same loca- 
tion. We refer you to the Interna- 
tional Credit Bureau Co., 6 Sherman 
Street, Chicago, and 621 Broadway, 
New York City. 

Statement of your account will be 
sent at the earliest possible date. On 
Saturday, when the raid was made, 
every desk in the office was cleared 
out, every spindle containing the 
day's transactions was taken, state- 
ments ready and waiting to be mailed 
were also taken and destroyed, and 
the result has been one of great con- 
fusion We are working day and 
night to straighten matters out and 
only ask your indulgence for a short 
time. 

Yours very truly. 

The George T. Sullivan Company, 
per Geo. T. Sullivan, 
President. 

(GTS : M. P.L) 

Chicago, June i, '03. 



Troy, Ohio. 
Dear Sir: 

Your letter of May 29th received 
and in reply beg to say that it is not 
our fault that our checks go to pro- 
test as the attachment was put on 
after the check had been sent out. 
The funds were at the bank when the 
check was made and the moment the 
attachment is raised it will be hon- 
ored. 

We have so many thousand clients 
and cover so many thousand miles of 



THE "FAKE" MERCANTILE AGENCY 295 

territory by wire, it is impossible to 
pay this man a hundred and that one 
ten thousand, upon demand, when 
this attachment covers everything 
completely. The moment the same is 
raised you will get your funds and 
all protested checks that you have of 
ours will be rapidly paid. We have 
always treated you fairly and squarely 
in all dealings heretofore and promise 
you the same treatment in the future. 
We ask of you not to become im- 
patient at the present time and every 
knot that you tie in the rope we will 
have to untie which, of course, will 
create exhaustion if everyone jumps 
on. We will do the very best we 
can and pending same you may trade 
on your account as much as you wish 
and \ye will not call you for one cent 
margin should the market go against 
you. We will continue business as 
heretofore. 

Yours very truly. 
The George T. Sullivan Company, 
per Geo. T. Sullivan, 
C. 

The following is typical of the news items which ap- 
peared in the Chicago papers of September 4, 1903: 
SULLIVAN IN MORE TROUBLE. 

Appointment of Receiver Comes as Climax to Broker's Woes. 



Other troubles have fallen to the lot of George T. Sullivan, the 
broker who was noted for his " red letters " and for clashes with 
the police when he was connected with the open board of trade. 
In the absence of Judge Kohlsaat, Bankruptcy Referee Eastman 
yesterday appointed the Chicago Title and Trust Company as re- 
ceiver for the remaining assets of the broker. This was done on the 
application of creditors who had filed a petition in the Lmited States 
District Court, alleging that the George T. Sullivan Company is 
insolvent. 

Creditors of the Sullivan concern became anxious last June after 
" Red Letter " Sullivan had been expelled from the open board. 
They flocked to Chicago from all parts of the country and it was 
expected at that time that an attempt would be made to have the 
broker declared bankrupt. 



296 GOLD BRICKS OF SPECULATION 

No estimate of the indebtedness of this concern has been filed in 
court, but it is thought the debts will amount to several hundred 
thousand dollars. Neither is it known what the assets of the con- 
cern are. The principal stock found by the receiver was a number 
of account books. 

I beg to direct the attention of the police departments 
of the great cities and the postoffice department of the 
United States to these methods. 



" FAKE " BANKS AND BANKERS 297 



CHAPTER V. 

" FAKE " BANKS AND BANKERS AND HOW REFERENCES AND 
FINANCIAL REPORTS ARE SOLD. 

Banks and trust companies as aids to swindlers ; selling bank refer- 
ences ; issuing " fake " checks on a " fake " bank ; short life of a 
Chicago " bank " which advertised to sell references ; the mining 
exchange as a side issue. 

That swindlers should go so far as to establish a bank 
or a trust company in order to defraud the public and to 
sell the bank references to other swindlers, seems to me 
to be almost beyond comprehension. 

In November and December, 1902, I closely followed 
the fortunes of such an institution, and, although cognizant 
of the intentions of the schemers, I was unable to induce the 
proper authorities to interfere. It being a new class of 
deviltry with which the officers of the law were unac- 
quainted, they were fearful of the consequences in the 
absence of a precedent, no one ever having heard of the 
police raiding a bank. By indirect methods the downfall of 
the banking house was accomplished, nor, however, until 
the promoters had netted a neat sum. 

The bank was one of a series of swindles under cor- 
porate names, and while I was watching its career, the 
chief swindler was tried in the United States courts and 
sentenced to jail for one year for " using the mails to fur- 
ther a scheme to defraud." 

I started the investigation November 3, 1902, my curi- 
osity having been aroused by the following advertisement 
in the " Business Chance " column of a Chicago paper of 
the preceding day (Sunday) : 



298 GOLD BRICKS OF SPECULATION 

BANK REFERENCE— Can you afford to be without a reference 
that insures success. Every reasonable help extended. Ad- 
dress C 139 office. 

My agent, who answered the advertisement, received 
the following reply : 

THE COMMERCIAL BANK OF ILLINOIS, 
352-356 Dearborn Street. 
Phone 2887 Harrison. 

Chicago, Nov. 5, 1902. 
Mr 



City. 
Dear Sir : 

Your favor of the 3rd instant making inquiry relative to " Bank 
Reference," etc., is received. In answer we desire to say that the 
customers of this bank as well as other people engaged in legitimate 
pursuits are permitted to use the bank for reference on terms com- 
mensurate with the service rendered. 

Where desirable one of our ablest men becomes thoroughly 
posted regarding your proposition so that he can explain it in detail 
to your clients. This you will observe is something the banks 
usually decline to do for lack of time and patience, notwithstanding 
it is a help every business man needs and is entitled to. 

We shall be pleased to have you call for an interview at your 
convenience, assuring you of our most careful attention to business 
intrusted to us. Very truly yours, 

The Commercial Bank of Illinois. 

Per W. W. Bristol. 

The audacity and novelty of the scheme induced me to 
follow the investigation with some vigor. A visit to the 
premises designated on the letter-head of the bank, which, 
by the way, was not in the banking district, brought out 
the following interesting facts : A large room on the main 
floor of the building had been fitted up as a bank and stock 
exchange. Elaborate signs on the windows read as fol- 
lows : 



'TAKE'' BANKS AND BANKERS 

THE COMMERCIAL BANK OF ILLINOIS. 
THE INDUSTRIAL STOCK EXCHANGE OF CHICAGO. 

The interior of the banking and exchange room was 
gorgeously fitted up, but the office force consisted of only 
two young lady typewriters. 

The investigation was now broadened so as to include 
the " Industrial Exchange." I found among my collection 
of " fake " trade journals one of recent date containing a 
write-up of the Exchange, which article is so '' instruc- 
tive " that space should be given to it : 

FILLS A LONG FELT WANT. 



The Industrial Stock Exchange of Chicago Organized to Form a 
Market for Securities Unlisted on Other Exchanges — Of In- 
caloulable Value to Both Buyer and Seller. 

It is undoubtedly true that very few of the investors who buy 
so freely of stocks and bonds nowadays know much about the prop- 
erties in which their money is invested — or more correctly speak- 
ing, whether the securities are really worth the price paid for them. 
On the other hand new and meritorious mining and industrial cor- 
porations frequently find it extremely difficult to dispose of their 
securities because the latter lack that public endorsement of an 
exchange which inspires so much confidence in the average investor. 
Obviously, therefore, the creation of any idea which brings both 
corporation and investor close together by enabling the one to find 
out all the essential facts about the other — more especially the true 
market price at which the securities can be bought — is to be highly 
commended. 

This is exactly what is done by the large stock exchanges of 
the world, yet only to a limited degree, for there are thousands of 
unlisted stocks and bonds that are fully as reliable and meritorious 
as those gigantic issues recognized by the millionaire exchanges. 
As is well known, stock exchanges are to-day recognized as the best 
medium through which the investing public is enabled to ascertain 
the value of securities offered for sale. In point of fact, no plan 
has ever been found to equal in its extent the influence of stock 



300 GOLD BRICKS OF SPECULATION 

exchanges, for the pubHc has learned that they impartially report 
the facts as they exist concerning any given security. 

This point is better illustrated by the following extract from a 
letter of Mr. C. S. Northrop, vice-president of the Consolidated 
Horse Shoe Company, No. 64 Sherman street, Chicago : " Through 
the influence of the Industrial Stock Exchange in correctly quoting 
and representing the stock of this company, we have been able to 
handle our stock to better advantage than ever before. We there- 
fore fully appreciate the value of being listed. We also appreciate 
the value of the assistance of the Bank, whose services you enlisted 
in our behalf." 

W. D. Carlisle, treasurer of the Consolidated Mines and Develop- 
ment Company, of Afton, Va., says : 'Tt inspires the confidence of 
the investor — strengthens the security — advertises the property — 
in short, it is a favorable introduction to the people of the securities 
offered, and is of great assistance in the disposition of stock. We 
are much gratified with the help it has afforded us." 

The Industrial Stock Exchange of Chicago fills a long felt want, 
viz. : The creation of a market where securities not listed on other 
exchanges of the country may be bought and sold, and a reliable 
and authoritative market price established for the benefit of both 
buyer and seller. This will be of greater advantage to the corpora- 
tion than to the buyer as a matter of fact, for it will establish a 
legitimate market price for its stocks and bonds — it will protect the 
company from the broker who makes it his business to buy up stock 
from public holders and sell it at a price way below that at which 
it is quoted. 

The organizers of the Industrial Stock Exchange of Qiicago 
argue correctly that stock of merit can be always sold if done 
rightly. The confidence of the public is necessary, and through the 
medium of the Exchange stock is daily brought before the public. 
Hence, with an exchange of this nature to record all sales of stock 
and to report on the merit of stock companies, the public is not 
only protected, but the company selling the stock is greatly bene- 
fited. Transactions are authenticated by certificates issued by the 
Exchange and are also reported in the Exchange Bulletin, thus 
showing the investing public that the stock is as good as repre- 
sented, which accordingly makes them anxious to purchase it. 

For the sum of $100 the Exchange will list the stock of any 
company that is meritorious and for a fee of $50 and $10 per year 
any person may become a member. Quotation certificates are issued 



" FAKE " BANKS AND BANKERS 301 

only to members of the Exchange. In order that the Exchange 
may render as much assistance as possible, it is suggested that each 
listing corporation send it all the information possible concerning 
the company's holdings and prospects. With the Exchange in a 
position to speak well and authoritatively on a stock the result is 
bound to be extreme popularity of that stock with the investing 
public. 

The Industrial Stock Exchange of Chicago has commodious 
and finely furnished quarters at 356 Dearborn street, comprising 
l)ractically the entire bank floor. There is every known convenience 
at hand for the accommodation and comfort of all members and 
every facility for the prompt and satisfactory transactions of busi- 
ness between members. The idea is to conduct the Exchange in 
practically the same manner as the Millionaire Exchanges are con- 
ducted. From every point of view the institution may well be 
regarded with favor as well as an organization that fills the present 
necessities of both company and investor. It is a signal success, 
and those who appreciate the advantages it offers, both in listing 
and membership features, would do well to address the Exchange 
at once for detailed information. 

I then took up the investigation of the promoters of 
the schemes and uncovered a curious combination of in- 
dividuals. The moving spirit in both enterprises was one 
W. W. Bristol, a man with a record, who, while promoting 
the " bank " and the '' exchange," was on trial in the United 
States court for fraudulent use of the mails in a former 
enterprise. Associated with him and reported to be vice- 
president of the " bank " was C. S. Northrop, the same 
gentleman who spoke so highly of the Industrial Stock 
Exchange in the article just quoted from the " fake " trade 
journal. Three other individuals made up the quintet 
necessary to provide officers and directors for the " bank," 
while the " exchange " apparently had no officers, it being 
understood to be Bristol's enterprise, and the style under 
which he was operating. No legitimate excuse for the 
existence of either of these concerns could be found. No 



302 GOLD BRICKS OF SPECULATION 

resources were discovered, and the conclusion I quickly 
reached was that the " bank '' and " exchange " were 
simply vehicles for Bristol to continue his operations which 
early in the year had been rudely interfered with by the 
postoffice authorities. 

About two weeks after I had received the '' bank refer- 
ence " letter, another one of my agents, living- outside of 
Chicago, received a letter from a " get-rich-quick " concern 
with which he had been corresponding. Apparently the 
" fakers " had enclosed in the envelope addressed to my 
agent a letter and a check for $450 intended for a customer 
at Philadelphia. Fortunately he did not return the letter 
and check to the senders, but sent them to me for instruc- 
tions. Of all the schemes calculated to deceive, I think this 
was the shrewdest I had ever come in contact with. My 
agent, who had been corresponding with '* fake " concerns 
for months and knew the character of the senders of this 
letter and check, believed they were bona fide, and, as I 
afterwards discovered, hundreds of these letters were sent 
out, and the deception was complete in almost every in- 
stance. Upon examining the letter and check I was satis- 
fied that the '' get-rich-quick " schemers had formed an 
alliance with the Commercial Bank of Illinois, and that the 
concern was aiding them. The check was drawn on this 
bank, and the letter read as follows : 



" FAKE " BANKS AND BANKERS 303 



M. TRAYLOR & CO. />>w^ 

GRAIN, STOCKS AND PROVISIONS ^ /^ ^ /^ rJ 

BOUGHT AND SOLD FOR CASH OR ON MARGIN ^ ^ 

OREN BOAi=ID OF T Ft A D E B U I L. D I N Q 

t-^/>. HoveaEber 19, 1902. 



John L. Monsoar, 

Philadelphia, Pa. 
Pear Sir: — 

We are pleased to hand you herewith our check on The Commercial 
Bamk of Illinois, Chicago, for $450.00, the net gain on your investment 
of $60.00 for Nov. 18th, naming "Higher" for Dec. Corn, which you will 
please acknowledge immediately. 

The gross profits were $468.75, our charges l/s cent per 
"bushel or $18.75 on 15000 bushels, leaving the ahove profit as 
stated. 

The range of Dec. Com prices were as follows: Nov. 17th 
Closing price 55 cents, Highest price reached on the 18th 58 l/8 cents, 
Closing price on the 18th 57 3/4 cents. 

We call your attention to the advantage of our "New Option 
Deal* in getting highest price reached on the 18th and you did not 
have to guess when it had touched the extreme point, as you have to do 
by trading in any other manner. 

As you left the investments to our judgment, we are, of course, 
pleased to have had the deal result profitably, as it is to our interest 
to assist our clients in making money. We are confident that the "New 
Option Deal"- plan surpasses all other methods of dealing and if you are 
at all familiar with speculation, you must know that it would have been 
impossible to have made 1/5 of the amount secured on an investment 
of $60 by any other plan in one day. 

We anticipate some very large fluctuations in both Grain eind 
Stocks in the next ten days and would suggest that you remit us imme- 
diately on receipt of this letter $20 to $100, as we feel confident 
that we can make you some large profits. Our information comes from a 
source that has proven very reliable in the past and we are sure it will 
be even more profitable in the future. We do a strictly brokerage 
business on commission and as we get no pay for our services unless 
we make money for our customers, you can readily see, it is to our 
interest to help you in every possible manner and we will at all times 
use our best endeavors for your success. 

Trusting our service has been satisfactory as well as 
profitable and hoping for your success in any future Investments , we 
remain , ^^,,-^1..^ 

Yours truly, »XA^C</ 




S04: 



GOLD BRICKS OF SPECULATION 



H 



Cbc CcmmerciallSaiih ofltthiofe 

356 Dtvborn Strait J^^'^-' 




V. M. TRAYLOR & CO. S " FAKE " CHECK. 

Armed with the evidences of attempted fraud and the 
combination of Bristol's " bank " and Traylor's '' get-rich- 
quick " scheme, I endeavored to bring about their downfall, 
advocating a police raid. But I succeeded only in having 
the Traylor office dismantled on a search warrant, and the 
manager, A. E. Griff, arrested. No one in authority 
seemed to think it good policy to raid a bank. 

While working to break up these two schemes, my 
agent received several comnumications from V. M. Tray- 
lor & Co., the most nota1)le of which was mailed Decem- 
])er 2, 1902, and established beyond a doubt the relations 
of the two schemes. It is too lengthy for publication, but 
the title and a few extracts are sufficient to demonstrate 
to the reader how these thieves coml)ine to prey on the 

pubhc. 

•' IN UNION THERE IS STRENGTH." 

THE "SYNDICATE POOL" PLAN OF INVESTMENT IN 

GRAIN AND STOCKS. 

V. M. TRAYLOR & CO., 

BROKERS. 

GRAIN, STOCKS AND PROVISIONS BOUGHT AND SOLD FOR 

CASH OR ON MARGIN. 

OPEN BOARD OF TRADE BUILDING. 

Dear Sir: Chicago, Dec. i, 1902. 

" In Union there is Strength " is more potently demonstrated 
in speculation than in any other pursuit of business. With our 20 



" FAKE " BAXKS AND BANKERS 305 

years of experience and with the closest study of the causes of suc- 
cess and faiku-e, we can find no more necessary adjunct than the 
great force of capital. 

We have reasoned with ourselves in making and planning sys- 
tems for success and have taken such examples as J. P. Morgan, 
Rockefeller, Gould, Vanderbilt, Armour and many of the others 
who have become multi-millionaires by speculation. "^^ * ''' 

The " Syndicate Pool " plan is a new phase of the Community 
of Interest idea made so popular by J. P. Morgan, the only differ- 
ence being that our " Syndicate Pool " is composed of an unlimited 
number of small investors while Mr. Morgan's companies are made 
up of a limited number of rich men. * * * 

Those who take advantage of the opportunities offered by our 
" Syndicate Pool " will make more on their money in a week than 
they would under ordinarv conditions in a year. * * * 

THE FACT THAT THE COMMERCIAL BANK OF ILLI- 
NOIS ISSUES YOU A CERTIFICATE OF DEPOSIT FOR 
YOUR MONEY IS THE BEST GUARANTEE OF THE AB- 
SOLUTE HONESTY, SAFETY AND PROTECTION AF- 
FORDED ALL WHO PARTICIPATE IN THIS VENTURE. 

:^ ^; i|c 

If you conclude to take advantage of this money-making oppor- 
tunity, you will please remit from $50.00 to $500.00 to the Commer- 
cial Bank of Illinois, Chicago, who will in return issue a certificate 
of deposit for the amount of money you send subject to our order 
on demand for investment. We herewith enclose notification blank 
which you will kindly fill out and return to us, stating -the amount 
you have sent to the Commercial Bank of Illinois for the purpose 
of investment in our " Syndicate Pool." '^ * '^ 

Our long established connections with financial affairs and unex- 
celled facilities for the execution of orders is a guarantee that our 
management of this " Syndicate Pool " will be for the best interests 
of our members, and the fact that your funds are placed with the 
Commercial Bank of Illinois insures the safetv of vour investment. 



Accompanying the circular was the notification blank 
mentioned, which read as follows : 



306 GOLD BRICKS OF SPECULATION 

V. :\L TRAYLOR & CO., 
BROKERS, 

OPEN BOARD OF TRADE BUILDING^ 
CHICAGO. 

Dear Sirs: 

I have deposited with The Commercial Bank of IlUnois, Chi- 
cago, dollars, subject to your order, to be 

invested by you in speculation according to your Syndicate or Pool 
plans. 

Please remit dividends monthlv until further instructed. 



Upon submitting all of the evidence in my hands to 
them, the police raided Y . ]\I. Traylor & Company's office 
on December 6, 1902, and the following clipping from the 
Inter Ocean of the next morning gives some details which 
are interesting: 

As A. E. Griff, who, the police say, is the head of "V. M. Tray- 
lor & Co., brokers. Open Board of Trade building," was dictating 
a letter yesterday afternoon to his stenographer, in which he stated 
to one of his customers that he " was sorry to say, but the money 
which had been turned over " to him " for investment had been 
lost," police from Chief O'Neill's office entered his office and placed 
him under arrest. Griff was taken to the Harrison street station 
and booked on charges of operating a gaming house and bucketshop. 

Griff's office is in the hnperial building, 260 Clark street. Ac- 
cording to the police, the name '' V. ]\I. Traylor " is fictitious, and 
Griff is the whole company. 

Many novel features were found in the raid. Numerous circu- 
lars were found, and hundreds of addressed envelopes, which con- 
tained circulars on the grain and stock markets, as well as several 
addressed envelopes containing checks for amounts as high as $500. 
The envelopes which contained the checks were clever ruses, the 
police say. The letter would be addressed to one person, while 
the check would be drawn in favor of another person living hun- 
dreds of miles away. The recipient would think a mistake had been 
made in addressing, and return the check, which would be useless 
to him. 

The company, according to the circular found in the office, was 



''FAKE " BANKS AXD BANKERS 307 

indorsed by the Commercial Bank of Illinois, 356 Dearborn street. 
B. G. Wilson, director, and one of the officers of the bank, denied 
last night that any authority had been given the company to use 
the bank as a guaranty. He said : 

" Our bank was started about six months ago, and not long after 
that A. E. Griff made application to use the bank as reference. We 
examined carefully into his references, and satisfied ourselves that 
he was all right, and so gave him the use of the bank's name for 
his personal business. Nothing was said about any company, and 
of the ' Traylor ' concern we have never heard until the arrest of 
Mr. Griff. If the company was using our name it was without 
authority." 

I now go back a few days and review the conviction 
of W. W. Bristol in the United States District Court on 
December 5, 1902, on a charge of fraudulent use of the 
mails. I do this for the purpose of keeping the stories of 
the two concerns abreast, as well as to place before the 
reader Bristol's prior schemes, which were apparently sim- 
ilar in many respects to his " bank.'' A newspaper article 
is here reprinted for the purpose of placing Bristol before 
you as he really was : 

(Chicago Inter Ocean, December 6, 1902.) 
William W. Bristol was convicted in the United States District 
Court yesterday on a charge of fraudulent use of the mails. 

Bristol was manager and secretary of the Surety Guaranty and 
Trust Company, and was said to have used this business as a means 
of defrauding persons through the mails. John R. Price, former 
Adjutant General of the State of Iowa, was said to have been his 
victim to the extent of $1,500, and M. J. Adams of Davenport, 
Iowa, of $1,000. General Price testified that fictitious indorsement 
of the company's standing was given, and he was thus persuaded 
to buy stock. 

Other witnesses testified that Bristol secured large fees for ex- 
amming abstracts of title, and that he usually kept the money after 
finding flaws in the papers. 

The raid on V. M. Traylor & Company's office and the 
confiscation of his papers, etc., exposed the check scheme. 



308 GOLD BRICKS OF SPECULATION 

Letters galore were found from intended victims (some 
of whom " bit "), returning the $450 checks sent them by 
'' mistake," and in each instance they received back a let- 
ter, thanking them for returning the check '' sent them by 
mistake of the mailing clerk.'' 

Below I give a copy of letter fi'om a victim, upon whom 
the '' check " got in its deadly work: 

, Miss., 1 1/23/02. 

V. M. Traylor & Co., 

Chicago, III 
Gents : 

Enclosed I send you check sent nie in error. 

I desire to place $20 with you to be used in any way you see fit 
to make best profits ; this as a starter. Advise me if this is satisfac- 
tory, don't wire. Respt., 



From what data I have at hand, I estimate that V. M. 
Traylor & Co. issued these fraudulent checks to the face 
value of at least $250,000. 

But the most interesting document which the raid of 
the Traylor office placed in the hands of the authorities 
was a contract for references and reports on financial 
standing, etc., of the Griff concerns, to be made by Bris- 
tol's Surety Guarantee and Trust Co. 

The agreement speaks for itself, and is as follows : 

This Agreement, made and entered into this 29th day of May, 
A. D. 1902, by and between The Surety Guarantee and Trust Com- 
pany and W. W. Bristol, of the first part, and A. E. Griff, of the 
second part ; 

Whereas, the parties of the second part have applied to the 
parties of the first part and requested them to procure a full report 
as to the standinc^ financially and commercially of the said parties 
of the second part for the purpose of reporting to parties making 
inquiries as to such standing of the said parties of the second part, 

Now, Therefore, in consideration of the foregoing and the 
payment to the said W. W. Bristol, one of the parties of the first 



" FAKE " BAXKS AXD BANKERS 300 

part, of the sum of three hundred and twenty-five ($325) dollars, 
as his compensation, he will procure said reports and keep the same 
up to date by additional reports and provide the said The Surety 
and Guarantee Trust Company w^ith said reports at all times. 

Tr IS FURTHER agreed that the said parties of the second part 
shall pay the said The Surety Guarantee and Trust Company 
twenty-five cents for each report made by it, and said company 
agrees to send out said reports promptly upon request of the patrons 
of the said parties of the second part or to write letters in lieu 
thereof, answering inquiries regarding the said parties of the sec- 
ond part. 

It is understood that the suits now pending shall not prevent 
said parties of the first part from carrying out this agreement. 

A. E. Griff Co-Operative Co., 

pr A. E. G. 
Surety Guarantee & Trust Co., 
pr W. W. Bristol, Secty. 
W. W. Bristol. 

W. W. Bristol was sentenced to jail for one year on 
December 22, 1902, for offenses committed prior to the 
establishment of the '' bank " and '' exchange," but while 
standing at the threshold of the jail, he promoted a similar 
and more gigantic swindle. The story of his adventures 
Avith the Commercial Bank of Illinois was published after 
his conviction, and in addition to the circumstances 
already related new features were brought out that are so 
intensely interesting that I will briefly review them. 

It developed, at about the time of Bristol's conviction, 
that there had been a large number of persons victimized 
by the promoters of the '' Commercial Bank of Illinois." 
The victims found that the bank had existed in the building 
at 356 Dearborn street just long enough to circulate hun- 
dreds of checks upon it. 

Some of the victims visited the '' bank " on December 
22, 1903, and found a pile of printed deposit slips, blank 
checks, waste paper, two desks and a broken-down counter. 



310 GOLD BRICKS OF SPECULATION 

A messenger from one of the National banks came in, 
while they were there, looking for the " paying teller." 
The messenger said he had a bundle of checks he " had 
been sent to cash." 

Bristol started the " Commercial Bank of Illinois " in 
November, 1902. He had his " stock-exchange " fake in 
the room adjoining the " bank " room, and he at first used 
the bank as a reference for his stock swindles. When the 
trouble with the Government came on, Bristol and his con- 
federates decided to make a " stake " quickly through the 
bank. They had blank checks printed. At first they oper- 
ated in the country, buying good stocks or whatever else 
they could use, and sending in payment certified checks on 
the Commercial Bank of Illinois. 

These checks began to come in through other banks, 
and Bristol and his men staved the banks off with one 
excuse or another for a few days. In these few days the 
swindlers went through the city making small purchases 
and tendering checks for much larger amounts on the 
" bank." If any merchant refused or questioned the check 
he was asked to '' telephone to the bank." One of the 
swindlers at the " bank " end of the line answered the 
inquiry and told the merchant to hold the wire while he 
looked up the account. After a delay of a minute or so 
the merchant was informed that the check was good. The 
swindler then took his purchases and the good money of 
the merchant and disappeared. Chicago parties lost many 
thousands of dollars in this manner. The swindlers worked 
fast, and within three days after they started to float the 
checks in the city all disappeared except Bristol, who was 
under bonds. A manufacturer in the Bridgeport district, 
who allowed the use of his name as vice-president of the 



"FAKE" BANKS AND BANKERS 311 

bank, was in hot water. Pie was really a victim of the 
gang. 

A lawyer who had done some legal work for Bristol 
w^as paid with a check on the '' bank " for $25 which, of 
course, was worthless. The lawyer attached the furnitin-e 
in the " bank," which was of the very finest and cost about 
$4,500. Wlien he put on the attachment the landlord 
came in with an attachment, for the '* bank " had not even 
paid rent. The furniture was sold to a new bank which 
was opening, and the lawyer and landlord received the 
money due them, so that when the creditors visited the 
" bank " on December 22, 1902, even the furniture had 
been taken away. 



312 GOLD BRICKS OF SPECULATION 



CHAPTER VI. 

THE '" CONVENIENT '' STOCK EXCHANGE. 

Establishing a stock exchange for the purpose of protecting bucket- 
shop and " get-rich-quick " swindlers ; an expose of the methods 
of members of the Consolidated Stock Exchange of Philadelphia ; 
what they think of themselves. 

As the war against bucketshops progresses, new 
schemes to prolong the life of this nefarious swindle are 
constantly being brought to light. They often reflect more 
or less credit upon the ingenuity of the piratical guild that 
preys on the speculative public. When a bucketshop 
swindler pretends to make a transaction for a customer, 
he simply makes a memorandum of the deal, nothing be- 
ing bought or sold. In law the patron has the right to 
demand a statement from his broker showing the name of 
the person with whom the trade was consummated, also 
the place where, the time when, and the price at which, the 
transaction w^as made. A failure to supply this information 
to the patron upon reasonable demand is prima facie evi- 
dence that the trades were not made in a legitimate man- 
ner. Hence, an accommodating exchange, where brokers 
enter up any kind of an old trade on their books and see 
that a similar entry is made on the exchange books is of 
inestimable value to a '' faker " and is duly appreciated as 
shown by this article. 

A few honest men are occasionally decoyed into joining 
an exchange of this kind, but it is through theif ignorance 
of exchange methods and lack of information as to the 
character of the promoters. Chicago, New York, Boston, 
Bufifalo and Minneapolis have all experienced this phase of 



THE " COxyEXIEXr'' STOCK EXCHANGE 313 

the bucketshop and " get-rich-qiiick " game; but it falls 
to the lot of Philadelphia to provide the material for an 
article that should " put the public wise " as to this par- 
ticular scheme. 

The following extracts from documents, and letters, 
and past records of the promoters, will give the public a 
clear idea of the methods of the " moving spirits " in one 
of these concerns. 

In the Chicago Sunday Tribune, November i6, 1902, 
the following "ad" appeared: 

CONSOLIDATED STOCK EXCHANGE OF PHILA- 
DELPHIA. 

In order to increase the membership to five hundred a limited 
number of seats will be sold for $100 each until December i, 1902; 
after that date price will be $250 each. The Consolidated Exchange 
has many 3dvantages ; it is situated in the Bourse, without excep- 
tion the largest and finest exchange room in this country ; has every 
facility enjoyed by any exchange, such as stock, grain, cotton, and 
news tickers, clearing house, reading rooms, etc. This exchange 
has only been in existence for six months ; in that short time has 
demonstrated the fact that a broad active market can be found for 
mining, oil and miscellaneous securities; also active railroads and 
industrials traded in on the New York Stock Exchange. Board of 
Directors is composed of Philadelphia's most prominent and repre- 
sentative business men, w^hich alone is a guarantee of success ; also 
substantial and sustained advance in the price of member- 
ships. Address all applications CONSOLIDATED STOCK EX- 
CHANGE, the Bourse, Philadelphia. 

An inquiry addressed as per instructions in above '' ad " 
brought out the following reply : 

THE CONSOLIDATED STOCK EXCHANGE OF PHILA- 
DELPHIA. 
Executive Offices, 220-222-224 Bourse Building. 

Philadelphia, Nov. 21st, 1902. 

Mr 

Dear Sir : 

Replying to your favor of 19th inst. The advertisement in 
Chicago Tribune referred to by you contains practically the informa- 



814 GOLD BRICKS OF SPECULATION 

tion desired. For the present we are offering a limited number of 
memberships at $ioo each. This offer holds good until the first of 
December when the price will be advanced to $250. The dues are 
$50 per annum. The Exchange copies very closely the New York 
Stock Exchange and New York Consolidated. We clear our trans- 
actions daily through our Clearing House, which is chartered by 
this State. We have a broad market and deal in ten share lots and 
over and the brokerage charge is Ys each way or )4 the round trip. 

Our mining department is already an important factor. En- 
closed herewith please find the official list of sales made Saturday. 
At present time we have no insurance features. This is a matter 
that will have to be taken up later. 

I enclose you herewith an application blank. 

Hoping to hear that you have decided to join us, I am 
Very truly yours, 

A. A. Hayden, Sec'v and Treas. 
Diet. A. A. H. 

Simultaneously the party making the inquiry received 
by mail a copy of the Constitution and By-laws of the 
Consolidated Stock Exchange of Philadelphia — a pam- 
phlet of ninety-five pages. A comparison with the Consti- 
tution and By-laws of the Consolidated Stock and Petro- 
leum Exchange of Xew York showed that it was prac- 
tically a reprint of such portions of the latter exchange's 
rules as did not refer to its gratuity fund and grain trading. 
So religiously had the promoters of the Philadelphia ex- 
change followed the published rules of the New York ex- 
change that they failed to omit a provision adopted by the 
latter exchange during the war-tax period, providing that 
the stamp tax on all sales, of two cents on each one hun- 
dred dollars of face value, should be charged to the cus- 
tomer, llie war tax was repealed in April, 1902, the repeal 
being efifective July i, 1902. The Constitution of the Phila- 
delphia exchange is dated October, 1902, — clearly a very 
careless oversight. 

The balance of this expose is best given in the language 



THE " COXVENIEXT" STOCK EXCHANGE 315 

of those who " participated in the Ijenefits " derived from 
menihership in this " exchange." 

It was my rare good fortune to he permitted to copy 
the correspondence hetween a bucketshop-keeper of Chi- 
cago — who, for nUerior motives, became a member of the 
Philadelphia exchange — and one of the officers of the ex- 
change, together with the same bucketshop-keeper's cor- 
respondence wath his manager in Philadelphia, who was 
(as the correspondence shows) exceedingly frank and 
voluble in his descriptions of the methods and personnel 
of the new exchange. 

The characters who figure in the correspondence are 
well known to the police of New York, Chicago and other 
cities. The reader who has not closely followed the careers 
of the ''get-rich-quick " schemers, how^ever, cannot appre- 
ciate the significance of some of the remarks contained 
in the letters without first having some knowledge of the 
records of the parties referred to. Therefore, as briefly as 
possible, I shall give a sketch of the principals : 

George T. Sullivan^ member firm of Sullivan & Sullivan, 
New York City, in 1900. Member N. Y. Consolidated 
Stock and Petroleum Exchange, from which he was 
expelled in the same year for obvious fraud. Firm 
failed and Sullivan left the State. Liabilities, $65,000. 
Established in business in Chicago as George T. Sul- 
livan, made a feature of market letter printed in red 
ink and was known and signed as " Red-Letter Sul- 
livan." Methods extremely bad. Police raided his 
offices May 23, 1903. Indicted by grand jury a few 
days later for " keeping a bucketshop '' and also for 
" keeping a common gambling house.'' 

Creditors unable to collect after date of raid. 



316 GOLD BRICKS OF SPECULATION 

Number of creditors estimated to be above i,ooo, and 
liabilities several lumdred thousand dollars. 

Edw^ard Beekman Underhill splits up his name accord- 
ing to circumstances. Was manager of firm of Ches- 
ter B. Lawrence & Co., New York City, in 1.900, which 
failed. Underhill and Lawrence arrested and held 
to grand jury on charge of grand larceny. The firm 
appeared to be a clearing house for the most danger- 
ous swindlers at that time operating out of New York. 
Underhill charged with promoting and aiding similar 
schemes since. 

Colgate Fales, arrested February 3, 1903, by New York 
police and postal authorities, charged with using 
mails for fraudulent purposes. He was supposed to 
be the broker for a " discretionary pool " which prom- 
ised $800 for every $100 invested. The pool took in 
about $50,000. 

A. A. Hayden. Sufficient to say of this man, that the 
following paragraph appeared in the New York 
American of March 4, 1903, in the report of supple- 
mentary proceedings brought against J. Overton 
Paine by his creditors : 

" A remarkable stock privilege was produced in court by 
Paine to prove that he was not a bucketshopper. It was a 
paper signed by A. -A. Hayden, secretary of the Philadelphia 
Consolidated Stock Exchange, in which Hayden agreed to buy 
all the stocks offered by Paine's customers and to sell them 
all they wanted to buy at the current prices, clearing them on 
the Philadelphia Exchange. This Exchange was organized 
by Mr. Paine and several of his friends." 

J. Overton Paine has been a notorious bucketshop-keeper 
for several years. Assigned April 16, 1903. 

Arthur B. Paine, brother of J. Overton Paine and asso- 
ciated with him in business. 



THE " COXVEXIENT" STOCK EXCHANGE 317 

W. A. (*' Billy ") Porterfield, formerly ran bucketshop 
in Washington, D. C, under name of Carter & Co. 
Later, manager for J. Overton Paine & Co., Chicago. 
Embarked in business in his own name in 1902. 

C. D. (" Charley") Hughes, Oliver F. Malcolm and 
Charles Weinman, are notorious and have been 
connected with numerous '' get-rich-quick " schemes 
in New York. Their names have figured prominently 
in schemes of a shady character for past eight years. 



Extracts from the letters are submitted without com- 
ment, as I believe that their purport is so plain that " he 
who runs may read." 

E. Beekman Underbill, Assistant Secretary of the Con- 
solidated Stock Exchange of Philadelphia, to George T. 
Sullivan, Chicago: 

March 14, 1903. 
Sullivan : 

I want you to send on for one or more memberships in Consoli- 
dated Stock Exchange of Phila. This is my plan that has been 
adopted there and yon can readily understand that it comprises 
everything that is needed — 

All hands are coming in, McLain, Woodend, Haight & Freeze, 
F. H. Smith, Robinson, Lamar, Cowan, — in fact all of them. 

E. B. Underhill. 



Sullivan's reply to the foregoing: 

Chicago, March 16, 1903. 
Dear Mr. Underhill : 

Your telegram received from New York. I have been thinking 
of joining your Exchange in Phila. for some time. Noticed the 
advertisement in Sunday's paper and sent check for $100 early 
this morning while your telegram lay on my desk. I did not read 
it as I was only at the office for a short time on Saturday and all 
such matters were referred to mv Secretary. 



318 GOLD BRICKS OF SPECULATION 

I want two memberships. One I have subscribed for direct 
from the Secretary and the other I wired you subscription for. 
The second one is for one of the best houses in the Northwest, 
Edwards, Wood & Co., who have just joined our Board of Trade, 
and are fine people, also heavy financially. 

I have a case in Court the latter part of the week and I am in 
need of some names. Can you furnish them? Small transactions 
dating back a few months. Hope to hear from you in the morn- 
ing regarding the Consolidated Exchange, and all its benefits and 
surroundings. Upon receipt of this letter telegraph me who I shall 
make the second check payable to for membership No. 2. 



Underhill to Sullivan: 

Philadelphia, March 18, 1903. 
Friend Sullivan : 

I beg to acknowledge receipt of your favor of the i6th inst., 
also telegram of to-day which was answered by wire. 

I am enclosing to you under separate cover some more blank 
applications on one of which you will kindly have Messrs. Edwards, 
Wood & Co. fill out for the seat which you purchased for them. 
I thank you very much for getting these people although I only 
know of them as you mention. 

It would please me very much to have you put a wire to this 
Exchange and arrange to have all of your business transacted here. 
I can select for you some very good brokers with whom you can 
rnake special arrangements, and you might as well have a sheet for 
everything at a little cost. 

I trust you will bring this Exchange to the notice of everybody 
at your end that you consider desirable and hope that you can see 
your way clear to let some other business to come over your wire to 
this Exchange until such time as the Exchange can afford to have 
a wire of its own. 

As regards to the names which you mention to-day in your 
letter, I trust there will not be too many of them. I will do all that 
is possible for you in this line as I understand exactly how much 
you probably need them and I shall be glad to return the favor 
to you. * * * 



Sullivan to Underhill : 



THE -CONVENIENT'' STOCK EXCHANGE 319 

Chicago, March i8, 1903. 
Dear Mr. Underhill: 

Oliver Malcom is in town. I purchased a seat for him to-day 
on our Open Board for $400. He is going into business out here. 
He will be in to see me to-morrow and I will make him dig up for 
a seat on your Exchange. I have several parties to see yet. I am 
very busy. I have 85 offices of my own in the country and it keeps 
me piled up night and day and again, my health has been poor, 
which has been a great drawback. 

I am spending all of time to promote the Open Board of Trade 
as you are the Consolidated Exchange. Wish you would send me 
a list of good men in New York and Phila. that I can drum or 
induce them to join our Board here. This is a big proposition. 
Our markets are quoted here from 9 a. m. to i 130 by the Western 
Union throughout the country. They are going to begin first of 
the month sending out cables to all foreign points one-half hour 
ahead of the Chicago board for us. 

When several things under way become known these seats will 
sell at $2,000 in one day. One of the biggest National Banks of 
the City of Chicago is going to finance our institution. This is the 
Eort Dearborn Nat. Bank, in which Arthur R. Jones and Edwin 
Swift own the controlling interest. Will write more fully in a day 
or two. 

Colgate Fales was in town to-day. J. L. McLain & Co. are 
members of the Open Board and put lots of business on the floor. 



Underbill to Sullivan : 

Philadelphia, March 20, 1903. 
My Dear Mr. Sullivan : 

I beg to acknowledge receipt of your favor of the 17th, also 
iSth inst., enclosing check for the extra seat which you purchased. 
Kindly accept sincerest and fullest thanks for the interest you have 
displayed in furthering this matter along. This Exchange is in 
the process of creeping before it is able to walk and you can readily 
understand how much is falling upon my shoulders in my endeavors 
to build this thing up and you can also readily understand how 
thankful I am to my friends for lending me their aid in the 
matter. * >i= * 

In regard to the seats on your Exchange, I am trying to ascer- 
tain who would be probably available for you in Philadelphia and 



820 GOLD BRICKS OF SPECULATION 

New York as you request. Are you going to list stocks on the 
Open Board? 

I should think it would pay you to run a wire from your N. Y. 
office over to Phila. and have all your trades cleared through the 
Clearing House here and if you could succeed in selling a sufficient 
number of our memberships in Chicago it would then pay to put a 
wire to Chicago or if you happen to have a private wire of your 
own we could arrange to have all the business come over your wire 
and thus clear the whole West through our Clearing House. I 
have plenty of floor members here which I could place at your dis- 
posal at any time. I think it would pay you to open an office in 
Philadelphia and advertise your membership of this Exchange, you 
could not only get a good office business but pick up a good arbitrage 
business. When do you expect to come East, for I should like very 
much to go over the matter with you personally in Phila. or N. Y. ? 



Sullivan to Underbill: 

Chicago, March 23, 1903. 
Dear Sir : 

The transaction in question covered a period of about 4 months, 
amounting to less than 400 shares in 10 and 208s* at diflferent 
times. Sort of piker's transactions. I do not care for the names, but 
just want some one I can refer to as to who received the trades, 
being in the State of New York and transactions made in Chicago. 
This will be the end of any question or litigation. I have hustled 
around to get some memberships for you but the Knockers set up 
a howl claiming J. O. Paine was at the head of the Consolidated 
Stock Exchange and they will not enthuse. I don't know much 
about Paine of late years, but it is my opinion he is as good as any 
of them. They are all in for the money and that's all. We are not 
going to list stocks on the Open Board. This old organization has 
weathered the storm for 23 years and has a tremendous grain as 
well as provision business. 

I will open an office in Phila. soon and give you some business 
down on the floor. I have two wires East of New York, one local 
and one express. 

Any time you want things fixed up in the grain line I will gladly 
do it for you. 

*NoTE. — Evidently intended to read 10 and 20s. 



THE ''CONVEMEXT" STOCK EXCHANGE 321 

Sullivan to Underhill: 

Chicago, March 23, 1903. 
Dear Sir: 

Enclosed you will find a letter from Billy Porterfield, who I 
have been drumming to buy a seat on your JJoard. 



Underhill to Sullivan : 

Philadelphia, March 31, 1903. 
Friend Sullivan : 

Replying to your last letter I beg to state that J. O. Paine is a 
" dead one " as far as this Exchange is concerned. He has never 
figured as anything more than a member here and has never been 
active in the slightest on this Exchange. Your friend Porterfield 
need have no misgivings as to Paine's influence on this Exchange 
as I am in control here myself and I am building it up as sure as 
God made little apples. I know that I have the right principles 
which I am going to carry out. 

Your man Hunter with Colgate Fales was over here to-day but 
they did not purchase seats. I have got you a space here in which 
to place a wire and Hunter says that he will order the wire in 
immediately. You are virtually getting a branch office in Philadel- 
phia without rent by getting this space and the thing for you to 
do will be to spend the rent money in advertising in the local papers 
here and you will find a tremendous business coming to you both in 
stocks and in grain. I would like the privilege of using your 
Chicago wire for this Exchange in order that I may be able to 
advertise that we have a Chicago wire of our own. Do you object 
to the same? I cannot see how it will do you any harm and it will 
do us a lot of good. 

By the way, I trust you are having no dealings with that d 

scoundrel . When I see you personally I will tell you how 

the devilish scoundrel has thrown me. I was his client. ,He would 
throw his own mother for two dollars. He, by the way, was trying 
to get you up at police headquarters two years ago and I threw 
him off the track for you, when I knew that you were down in 
Pennsylvania. 

I trust that you will have the interest of this Exchange at heart 
and advertise it broadly and get us as many members in the West 
as possible. 



322 GOLD BRICKS OF SPECULATION 

Sullivan to Underbill: 

Chicago, April 2, 1903. 
Dear Sir: 

Yours of March 31st received, and in reply beg to say that I 

truly appreciate your opinion of . He is the worst type of 

cheap horse I ever saw. My Manager in New York consulted him 
on a case and his advice as usual was very much out of order. 

He immediately sent me a bill for $250 and said if I did not pay 
the next morning he would attach my New York office, so I see 
he is up to his old blackmailing schemes, and if I ever lay my 

clutches on that will be the end of him. I heard he squeezed 

you out of the corn deal. 

Charley Hewes (Hughes) is in town to-night, trying to get an 
office. He is broke. 

I will advertise the Exchange shortly in Phila. also in Chicago. 
Post Failes (Fales) on the system of doing business so he can 
tell Hunter when he reaches New York. I am not doing any stock 
business to amount to anything, but doing a big grain business. I 
wired you to-day on receipt of your letter that you might use my 
wires freely, and would also advertise your Exchange on my letter 
heads and would have a loop on your floor for your convenience. 

If you feel like expelling me at any time please remember this 
favor and return the compliment so I may be able to resign. 



Underbill to Sullivan : 

Philadelphia, April 2, 1903. 
Friend Sullivan : 

As my stenographer is sick to-day, just a line to you in long 
hand to thank you for your telegram of to-day, stating that your 
wires are at our disposal. Just keep your eye on me now and see 
what I will make out of that for this Exchange. I wish I could 
see you and talk over details. We could arrange a lot of matters 
together. When do you expect to be in New York ? Again thank- 
ing you with all my heart, I am 

Most trulv vours. 



Following tbe acquisition of tbe privilege of using tbe 
Sullivan private wires, tbe following letter was issued to 



THE "CONVENIENT" STOCK EXCHANCE 323 

prospective members by The Consolidated Stock Exchange 
of Philadelphia: 

Philadelphia, April 17, 1903. 



Dear Sir: 

We have just succeeded in installing the private wires on the 
floor of this Exchange. By an arrangement made with " The 
George T. Sullivan Company, Inc.," we are using their trunk line 
wires. Their wires run to one hundred and eight offices. We are 
now connected with Chicago, St. Louis and Omaha via Pittsburg, 
Cleveland, Toledo and Detroit. Also as far East as Portland, Me., 
via New York, Boston and intermediate points. These wires are 
for the use of the members of this Exchange and by an arrange- 
ment we have with the Company any of our members having offices 
in the same cities or towns with this Company can run a loop or 
pony wire and put their orders directly to the floor of this Ex- 
change. Another advantage not before enumerated is that this 
Exchange is open from 9 :30 a. m. and remains open until 3 130 p. m. 
We are still selling memberships for $100 each. As the Board of 
Governors may at the next meeting elect to raise the price in the 
near future, I would respectfully suggest that your application be 
filed at the earliest possible moment. I will be glad to furnish any 
details regarding Clearing House or other matters not fully set 
forth in explanatory letter. 

Kindly let us hear from you. I am, 

Yours truly, 

A. A. Hayden, Secretary. 
Diet. A. A. H. 
Enc. 



The man Fales mentioned in the correspondence be- 
tween Underbill and Sullivan, was established as Sullivan's 
manager at Philadelphia under the name of Colgate Fales 
& Co., about April i, 1903. The following correspondence 
between Sullivan and his manager lays bare the methods 
and viciousness of the rascals who prey upon the public 
under the guise of brokers: 



324 GOLD BRICKS OF SPECULATION 

D^^j^Sir: Philadelphia, Apnl 5, 1903. 

Hunter sent you the confirmations which were obtained in Phila. 

Osgood acted as your broker, and a record of all trades were 
placed upon the official books of the Exchange, and their books 
could be brought into Court, the trades are split up among five 
brokers. 

As to the Exchange itself would say that it consists of the usual 
crowd of highway men and some who really believe, in the future 
of the institution. They do about 2,000 sliares legitimately irl a 
day and wash about five times as nnich. 

There are some good men financially in it, and there are some 
who cannot be approached on anything but a square proposition : 
Have entered into a deal with a few of them to put trades down to 
each other as an accommodation, and others want tlie floor com- 
mission. 

Don't think much of the business that can be obtained from the 
members themselves but there is quite a little to be had from the 
Commercial Ex. which organization you ought to join, both as an 
advertisement, and for the business which would swing to you as a 
fellow member. This is a bona fide Ex. composed of solid busi- 
ness men. 

If the question arises in court as to how your orders reached 
Osgood in Phila. 

They were sent to N. Y. over your wire and thence to Phila. 
over J. O. Paine's wire. 

Arthur Paine appears among the brokers with whom Osgood 
executed the trades. 

T don't suppose it is necessary to caution you against Underbill , 
as )0U know him. r)Ut don't think I would encourage him too 
much. ^^ery truly, Fales. 

Fogel has an idea all of these people on the Ex. are porch 
climbers, but he is in sad need of education before he is competent 
to judge. 



Sullivan to Fales : 

Chicago, April 10, 1903. 
Messrs. Colgate Fales & Company, 

The Bourse, Philadelphia, Pa. 
Gentlemen : 

Plow much space have we on the floor of the Bourse ? Have we 
room enough to run off the Red Letter daily? You understand 



THE ''CONVENIENT" STOCK EXCHANGE 325 

fully that the Exchange and all its members has full access to our 
wires and 1 have given them the privilege of advertising this fact. 
We must do some advertising there and should we secure business, 
have we the facilities on the floor to receive clients? What mar- 
gins would we have to put up with our brokers there to make a 
sheet and execute business? I have not received any terms from 
you as yet and how late in the day can the sheet be made up ? 



Fales to Sullivan: 

Philadelphia, April 13, 1903. 

Dear Sir: 

Have just had booth placed on the floor of the Exchange which 
is 5x5, with an operator's table inside. This is space which Hunter 
engaged at rental of $50 per year. 

We have no room down there to get out the Red Letter, nor 
to do anything else except to receive orders. I have desk room in 
the Executive offices of the Consolidated Exchange but can do no 
work there whatever. Am going to get a small office or desk room 
with somebody where I can answer correspondence or do any work 
that is necessary. The Exchange has given us permission to bring 
all of our customers in on the floor of the Exchange through the 
side entrance, and until business necessitates a regular broker's 
office will be able to do very nicely. 

I, of course, saw your telegram to Underbill, but did not know 
whether it was a four-flush or intended as a positive arrangement. 
The Exchange advertised yesterday that they had a private wire 
system, but I did not know just how far you wanted them to have 
the use of the wire. 

Hunter told me to put the advertisement in Sunday's paper — 
5 inch, double column — so placed it in the Record for country trade 
and in the Inquirer for City trade ; have quite a few answers this 
morning to the ad and not a damned bit of your paper or letter 
heads to answer them on. 

In regards to margins with brokers, will say that it is not neces- 
sary to put up any. If you want to execute business regularly, I 
will buy and sell myself and give your name up, and make a sheet 
out in your name. If you simply want names on certain trades, I 
will cross it with a few of the porch-climbers, and put them on your 
sheet regular and clear them. We have until 11 o'clock the next 
day to get a sheet in the Clearing House. For crossing I will have 
to pay the floor a commission of $1.00 a hundred each way, and the 



326 GOLD BRICKS OF SPECULATION 

Clearing House charges are one cent on each lo shares. This is 
a practicable way of doing it. I would not advise that you put up 
your good money with any of the brokers down there to execute 
trades regularly. There is nothing to be gained by it, and you 
might get a lay down, and if you didn't get a lay down you'd get 
a double cross. 

I wrote you some time ago in regard to what it would cost to 
clear back trades, and also futures ; evidently you have mislaid the 
letter. Back trades before you were a member will cost you 1/16, 
since you were a member it will cost $1.00 a hundred. 

Before I left New York, I took the names of all Philadelphia 
correspondence to Hunter, and have made personal calls on these 
people whom I have found at their addresses ; have had about Yi 
dozen of them down on the floor of the Exchange. Will find it 
rather hard work getting stock business here, but wheat business 
is to be had. Very truly, 

G. T. S. : 

I forgot to say that in executing orders in your own name on the 
floor, that you will have to pay into the Clearing House or draft 
against it for the difference between the price at which you buy or 
sell at and the closing price at night, then if the trades are still 
open we will have to borrow and loan as the case may be, and to 
have an open contract with some one on the Exchange. Most of 
our contracts would be with Fletcher, Halter. Underbill and Hayden. 

Underbill is Assistant Secretary, but don't get the idea that he 
is the same Underbill that he was when }ou knew him in New 
York. He neither has the money he had then, nor the nerve, and 
he is not in good odor with the clique that runs the Exchange. 

The Journal of Commerce offers to let you write a weekly 
resume of the grain market, and publish it as reported by you. Do 
you want to do this? Very truly, 

Colgate Fales. 



Fales to Sullivan: 

Philadelphia, 4/1 5/1903. 
Dear Sir : 

I wired you this afternoon in regard to commission for Fletcher 
& Co. They ask for }i which is only fair to a man in the trade. 
This is hedge business and all orders are very fair size. They 
gave me an order for 200 shares to-day, which was not filled ; they 
are willing to put up their money, and I do not think they are any 



THE ''CONVENIENT" STOCK EXCHANGE 327 

wiser than anybody else. I wired Hunter and wrote him as well 
in regard to certain expenses here, and he came back at me by 
saying " make all your requests for funds from Chicago." This 
last week I paid the operator out of the privilege- money that I 
took in, but have no funds outside of this. Will you please draw a 
check to the order of W. Morrow for $35. Which is for constructing 
booth on floor of Exchange ; also one to A. A. Hayden, Secy, for 
$50, which is rental of floor space. As regards myself have you 
reached any conclusion? Please set your own figure, I have not 
drawn on you as yet, preferring to wait until you declared yourself. 

In regard to the St. Louis loop, which I wired you about to-day, 
would say that Charles Wineman (Weinman) who has rather an 
unsavory reputation and is a member of this Exchange, is about to 
open offices in St. Louis and wanted to know what wire would cost. 
Hayden did not know of the gentleman's career, and several other 
members of the Exchange volunteered it ; if they had not done so 
I should have written you. He has plenty of money, but has an 
unpleasant habit of talking too much when he gets in trouble. He 
is a squealer. 

I have put in an application for a membership on the floor, and 
if you are going to do any business, will execute it myself. There 
seems to be an inclination on the part of these pikers to squeeze 
every time they get a chance. 

If you are going to do any advertising here do you not think it 
v/ould be well to feature wheat, as there are no other advertisers in 
town who do this. The Red Letter says all you want to say about 
stocks, and it would make our ad distinguishable. 

Hunter is sending over by express to-day his old mimeograph, 
and will get the red letter out hereafter from this point. Have 
asked both you and Hunter for stationery and have not received 
anv vet. What shall I do, order it here? 



Sullivan to Fales : 

Chicago, April 22. 
Mess. Coli^atc Pales & Co., 

PhUa., Pa. 
Gentlemen : 

Enclosed find statement. Kindly Insert names opposite 10 C. 
& O. 10 B. & O. and 10 Sugar on both- sides and return at once. 

Very truly yours, 
GTS: M. The George T. Sullivan Company. 



328 GOLD BRICKS OF SPECULATION 

Fales to Sullivan: 

Philadelphia, Pa., April 24, 1903. 
G. T. S.: 

Have had these trades placed on the Exchange entries with the 
brokers' names as given you in the statement. C. F. 



Fales to Sullivan: 

Philadelphia, April 2y, 03. 
Dear Sir: 

* * * Enclosed you will find a letter from J. Walter Labaree 
& Co., who want to butt in on the wire service. This was at the 
instigation of Mr. Hayden and is in line with a previous telegram 
of yours. It is a certainty that you will get pretty sick of the ap- 
plications that are made by a lot of these pikers. If it is any guide 
to you, our old friend L. A. Prince is the manager of this firm. 

Under separate cover I send you the advertising page of the 
Press which will show you my idea of the scatter add. I got more 
replys from this one add already than I have out of the others put 
together. 

The trade in Philadelphia has got to be gone after good and 
hard. You cannot sit down and wait for them to come, but you 
have to go out and get them, for instance, if you get an answer to 
an add you have to go out and see the man. There is a tremendous 
pile of competition here. There is plenty of trade here if you get 
it running once, as it has been proved by every house that ever 
started here. What T can't land from the market letters I will sick 
(sic) the discretionary man onto. 

I have got an ex-member of the House of Representatives here 
who I am going to feature as the discretionary man in the way that 
I outlined to you while in Chicago. He stands well and has big 
references. In regard to the salary, I was not in a hurry for it. 
If you are willing to make it Twenty, let it go at that. I don't want 
any raise at all. The discretionary end will be all and more than 
I want after I get it swinging. 

He >>: 5|: >!= :|s >k ;k ♦ :!: 

Grafif told me to-day of an inquiry you made in regard to Story 
Cotton Co. If it is of any particular interest to you or you want 
to know who they are and a few of their ins-and-outs, I can tell 
you their inside history which is very interesting. However, I will 
not burden this letter with it unless you really want to know. 



THE "COXVEXIEXT" STOCK EXCHANGE 3^9 

I notice that you have my name featured on the letterheads. I 
don't beheve it will do you very much good. If possible on future 
stationery leave it off. It makes no difference to me, but I think 
it does to you. Yours very trulv, Fai.es. 

Die. C. F. 



Sullivan to Fales : 

Chicago, April 28, 1903. 
Mr. Colgate Eales, 

Phila., Pa. 
Dear Fales : 

All that is necessary in the Williams case is to acknowledge these 
trades if you so desire. We don't care one way or the other. He 
cannot make you show your books under the State of 111. without 
proper notice. He is a piker of the worst type and does not amount 
to anything. 

I would not give a decent man the name on trades, but just 
wanted to show this piker our stuff was actually bought and sold, 
but as a rule I am too independent to listen to any such propositions, 
but he being a cheap type thought would show him where we were 
at, and what our business is like. 

Yours very truly, 

The George T. Sullivan Company. 
GTS: M. 



Fales to Sullivan: 

Philadelphia, Pa., April 29, 1903. 

George T. Sullivan, Esq. 
Dear Sir: 

In regard to the G. H. Williams matter would say that Osgood 
only meant in his message that he was perfectly willing to do any- 
thing that you wanted him to do. 

You have the trades confirmed to you and you can hush him up 
very effectively by telling him to write to Hayden, the Secy, of the 
Exchange and ask him if the trades on his statement were executed 
by Osgood. Hayden has got to tell him they were and that is the 
end of it unless he chooses to mandamus the books of the Exchange, 
and they will corroborate Osgood's confirms to you. You paid for 
these and they are at your disposal, the money was cut up three ways 
between Hayden, Osgood and Paine and there is no reason why 



aao GOLD BRICKS OF SPECULATIOM 

you should not take advantage of it to the fullest extent. These 
people are willing that }'ou should. 

E. Virgil Neal makes the same request that Labaree made ; is 
there any answer to him. The Exchange got quite a few new mem- 
bers from advertising the wire, and if it goes ho further they have 
no kick coming. Very truly, Fales. 



Fales to Sullivan: 

Philadelphia, Pa., May 6, 1903. 
Dear Sir : 

The representative of Lee, Thompson Co., a Boston firm, whose 
manager, ]\Ir. John Renniger, is a member of this Exchange and 
a friend of mine, would like to throw in a pony to you at Boston 
and have his trades cleared. I would like to offer the following 
suggestion, and believe that in doing so, it would forward your 
interest here : 

The firm in question are doing about a thousand shares a week 
at present. They are pretty good advertisers and of course their 
business will increase. I would suggest that you let them throw 
a pony into your Boston office and then fill them there, or part of 
them there, and let the balance come over here to Philadelphia, and 
be crossed on the floor here. You probably don't appreciate what 
this gang of vultures are, here on the floor. They see me doing 
some trades for New York, a very few of them, and they all want 
to cut in and get a slice of it. 

Now, you are going to need back trades to quite an extent in the 
natural course of business and there is a general inclination here 
not to accommodate because they don't think they are getting enough 
volume. 

My suggestion in letting Lee Thompson throw this business 
over here would be to put it on the floor here and let these little 
fellows all get a slice of it, then we can get back at them and get 
anything we want. I think the firm in question would be willing 
to pay $8 for the round trip and bear their own loop or pony 
expenses. This would be about twice as much as you would have 
to pay for it and it w^oukl placate the aforesaid vultures. 

I have just made arrangements with one gentleman on the floor, 
with whom I can cross anything I want to, but it will not do to 
have all one name. 

Our friend the Secretary here shows an inclination to squeeze 
and we can accomplish all we want to here without his assistance. 



THE " COXVEXIEXT " STOCK EXCHANGE 331 

A little pap will go a long way, especially as the Lee Thompson Co. 
pays the freight. I don't know that it will be necessary to put it 
all over here, but at least put enough over here to have a semblance 
of something doing. 

I realize the commission rates spoken of is not much but it looks 
like good policy to me. 

If you confirm the things to Lee Thompson & Co. you can make 
them put up a deposit and simply charge the commission account 
against them right straight along. I wish you would do this. I 
actually think it is necessary. If you don't want to do it in the 
way I have mentioned, make some offer of a proposition so that I 
can have a decent excuse for turning them down. If you fall in 
with the idea, please wire me on receipt of this. 

I see my " cold-blooded " friend IMalcom has gotten himself 
disliked out in your City, and trust that he has not in any way 
entangled you. Yours truly, 

P. S. — Underbill has just made a welsh here for about a thousand 
dollars. They are trying to come to some understanding with him, 
but he is trying to pay them off in nerve and talk, and they want 
a little money as well as that. He has made himself rather un- 
popular here, and I am very much afraid this business will be his 
finish. I am getting a little WHEAT business here right along, 
and some privileges. Just as soon as those prices get together, and 
I can get at those people at the Commercial Exchange, you will get 
a very neat little sheet right here on the Bourse. Another argument 
on the Lee Thompson matter, their business will come very near 
paying the whole expenses of this office and it is those same expenses 
which concern me. C. F. 



Sullivan to Fales : 

Chicago, May 8th, 1903. 
Dear Mr. Fales : 

Your letter of Alay 6th received. I have neglected the Phila- 
delphia office shamefully owing to so many things to attend to here. 
Don't make (?) the Exchange people for making a kick. Wired 
you to go ahead in the Thompson ^natter. Also wired Boston and 
New York to follow your instructions regarding the execution of 
wires and etc. and collecting commissions. You will have to look 
after this matter yourself, and notify Boston and New York 
accordingly. 

Malcom is mixed up here in an assignment case as you know, 



S3^ GOLD BRICKS OF SPECULATION 

but will have nothing serious come from it. They got my name in 
the paper the other morning. I bought a membership for him and 
recommended him to the Open Board. The paper merely stated 
that I had purchased the seat for him. 



Fales to Sullivan: 

Philadelphia, Pa., May 8, 1903. 
Dear Sir: 

E. Virgil Neal & Co. desire me to make the following proposi- 
tion to you. They want to open offices along your lines where you 
have no offices ; you to furnish the loop, and they will pay all 
expenses. They will keep margins of two or three per cent with 
you on everything and keep it good, and they want y% rebate and 
no interest charges. They will pay the loop rent in New York and 
will not enter towns where it conflicts with you. 

They have asked me to send a special delivery to you and desire 
an answer at your earliest convenience. 

Neal is worth about Vz million. 



Sullivan to Fales : 

Chicago, May 12th, 1903. 
Dear Sir: 

Your letter received. E. Virgil Neal & Co. may use our drops 
as per your suggestion at $150 per month payable in advance from 
Portland, Me., to San Francisco, Cal. They do not propose to give 
us any business, and you no doub^: well know this. If they give us 
all their business we will not charge them anv wire rent whatever. 

G T S : M. 



Fales to Sullivan: 

Philadelphia, Pa., May 9th, 1903. 
Dear Sir: 

John E. Collins was m to see me to-day saying that he had just 
returned from Chicago and spoke of an interview he had with you. 
What do you think of putting him on the road within a radius of a 
couple of hundred miles of Philadelphia, and letting him try to get 
the C. N. D. business and cap the discretionary game as well? I 
would not recommend this with any other man in my knowledge 



THE " COXrEXIEXT'' STOCK EXCHANGE 333 

or whom 1 know, but 1 know of one firm with which he was con- 
nected in a similar capacity and he turned into that firm ahnost a 
milHon dollars. 1 don't suppose that Collins would like to have 
Malcom know what he is going to do as he has just turned down 
a proposition from him, but if you can get at Malcom and put it to 
him in such a way that he will not know what you are after he will 
corroborate my statement as to Collins' worth. You have had an 
interview with him and possibly you may be prejudiced. There is 
no getting around the fact that he can turn in more money from 
the country than any other man in my knowledge. 

Getting down to the question of dollars and cents, to try him out, 
it w^ould cost about $50 a week and expenses, and the same amount 
in salary. I would favor putting him out for about six weeks 
which would be a fair trial and see what he can do. He is rather 
an expensive man, but he is worth it. I have the discretionary end 
of it here, all in shape now to float, and there isn't going to be 
anything raw about it either. 

That $2 wheat letter that I sent for, I want to get into the 
hands of people to whom the Discretionary letter is going. If you 
can see your way to the money outlay to cover a trial with Collins, 
I would advise it. 

I have written Renniger of Lee Thompson Co. and will be in 
communication with him over the wire Monday. 

If we could win the wheat money that we have on deposit here, 
which is about $400, I don't think that I would have to call on you 
for any funds whatever. But most of it is brokers here on the 
Consolidated and the moment they close out a trade, they want 
a check. 

Diet. C. F. 



Sullivan to Fales : 

Chicago, May 12, 1903. 
Dear Mr. Falfs : 

Your letter of May 9th received. Regarding Mr. Collins, will 
say I will think it over and see what can do. Collins is all right but 
it takes too much money to handle a man of his size unless some- 
thing in sight to guarantee it. $100 per week for a new man on the 
road Avhen business is so dull generally looks like suicide to me. 

If stocks were booming and wheat on the boom, it would be a 
good gamble, if not a good business proposition. 

G T S : M. 



334 GOLD BRICKS OF SPECULATION 

Sullivan to Fales : 

Chicago, May ii, 1903. 
Dear Sir : 

In all '* ads " which you insert in the Philadelphia papers be 
sure that you mention Harrisburg, Lancaster and Altoona. Give 
their addresses so that the Pennsylvania people will know where 
to reach them. 

Charley Hughes is in town as a man with a bank roll. They 
are in on the Open Board and expect to land some big fish before 
they quit this part of the country. Malcom is here very much dis- 
turbed over affairs. 

Open Board election is pulled off to-morrow and I am not taking 
any part one way or the other. Could have had most anything I 
wanted had I fought for it, but these fellows want to run the institu- 
tion to suit their own tastes, so let them 2:0 it. 



Fales to Sullivan: 

Philadelphia, Pa., May 14, 1903. 
Dear Sir : 

Immediately after receiving your wire this morning in regard 
to the Harris, Gates knock, I went to see L. G. West, one of your 
sponsors. It seems that Hancock, who is correspondent of H. & G., 
put in a protest against you. The assertion was also made that 
you were an expelled member of the Board of Trade. We got one 
of the members of the Committee, who is very friendly to West, 
and he showed us the reports that were dug up by Hancock. Of 
course they had the Board of Trade and the Consolidated of New 
York mixed, and the whole thing was exaggerated. West's friend 
told him that he was willing to do anything that he wanted to do 
but that the balance of the Committee were opposed to your election 
and had agreed to turn you down. The whole thing was a pre- 
arranged plan, so I withdrew your name rather than give the other 
members of that Exchange and the rest of the knockers around here, 
a chance to talk scandal. 

It seems too bad to lose this Commercial business, because I 
know it was good and creamy, and I didn't want to discuss the 
matter any too much over the wire, so I used my discretion in the 
affair. In regard to the Neal business, will say that every share 
of stock that comes over the wire from their offices is to come to 
us and be margined. They are going out in a company name of 



THE " COXVENIENT" STOCK EXCHANGE 335 

some sort, but Neal is back of it and be bas plenty of money. Up 
to tbe present I bave gotten tbem to promise all trades up to January 
I, 1904. 1 tbink tbey are in earnest, but I want to see a little more 
about it before we put loop into tbeir Pbila. office which they have 
just started. They will start New Brunswick, N. J., York, Pa., 
and if you can get a wire there or throw our wire into Wilmington, 
Del., they will be started in the order named. Their representative 
spoke about Harrisburg. I didn't say anything about it, but 
thought may be you would like to surrender that city to them. It 
is a pretty tough proposition in that town, and it looks as though 
you would save about $40 a week by letting them have it. If they 
don't make it stick in Harrisburg, there is nothing to stop you from 
taking it back again. They may have the trade worked up well 
enough by that time for you to take it back. Lee Thompson Co. 
came over here like a lot of Jews and started to beat me down on 
the commission and I turned them down cold. They have got to 
do business here some time and they have got to pay our price. I 
have gotten in four new accounts in the last two days, or rather one 
of them w^as an old account renewed. They are two hundred 
dollars, fifty dollars, forty dollars, and twenty dollars, respectively. 
The fifty dollar man is short of cotton and within seven points of 
going overboard. 

In regard to the Collins matter, I would not have thought of it 
had I not had the proper names for him to go and see, but I think 
you are right at that. If the Fall shows any better promise, I will 
bring It to your attention again. 

Noticed your comment on Charley Hughes. " For the love of 
God " where did he get it? He is a good fellow but he has got an 
awful thick head. Look out for Malcom. His blood runs as cold 
as a snake. Yours very truly, 



Sullivan to Pales : 

Chicago, May i6th. 
Dear Friend Fales : 

Have not seen Malcom for several days. Hughes has a short 
wire to me going to give me his business. Don't think he will 
give me much. 

Wish you w^ould write me the number of accounts received since 
you have been there, total money you received and amount paid out, 
leaving amount on hand. 



336 GOLD BRICKS OF SPECULATION' 

Harris, Gates explanation satisfactory to me. As there is so 
much money on hand won't have to pay for the seat on the 
Exchange. There is not much doing around this town that I 
don't learn of with telegraphers, employes and various telegraph 
companies. 

In regard to Lee Thompson also Neal, want you to use your 
best judgment. 

Wish you would make some kind of an arrangement to make a 
sheet on the floor. Have Hunter send you some business. How 
much capital would you have to have there to make a sheet every 
day? Would there be much chance of getting trades in and out 
without loss? Give me an idea how it can be done there. 



All " things " created have some task to perform in the 
struggle which the human family is making toward per- 
fection. I believe that the world is indebted to Mr. Under- 
hill, to Mr. Sullivan, to Mr. Fales and to the several other 
gentlemen w^ho have unconsciously, or otherwise, contrib- 
uted to this article. They have discharged a portion, or 
all, of their obligations to their fellow men. They un- 
cover to the world a condition, which a very few suspected, 
but which no one could prove. It now remains for society 
to make such conditions impossible. 

If among the members of either house of Congress, 
there is one who can grasp the significance of the corre- 
spondence which I have here submitted, I desire to suggest 
to him the consideration of the question of the feasibility 
of a Federal Statute, that will protect legitimate exchanges 
and at the same time safeguard the public. This end can 
be attained by licensing brokers and commission merchants, 
thereby constituting them quasi-public servants. The evils 
of the " fake " exchange, and the " fake " broker and the 
bucketshop would then disappear. 

Minneapolis is the seat of a " grain and stock ex- 
change " whose functions are similar to those of the " ex- 



THE ''CONVENIENT" STOCK EXCHANGE 337 

change " just described, with the addition that it is a " quo- 
tation factory," — as described elsewhere in this book. 

If the people and the authorities of Philadelphia and 
Minneapolis will tolerate such frauds, then the Federal 
Government should come to the aid of the balance of the 
people of the Nation and protect them against these whole- 
sale swindles perpetrated under the guise of trade and 
commerce. 



PART IV, 



Exchanges and Speculation, 



CHAPTER I. 

TO THE public: 

GENERAL IGNORANCE OF EXCHANGE METHODS. 

Exchange methods misunderstood and the reason therefor ; all 
future-delivery transactions similar ; public confused by the 
criticisms of persons with only a superficial knowledge of Ex- 
change methods ; enormous volume of farm products marketed 
through members of the Chicago Board of Trade. 

The observations expressed in this volume reflect the 
result of years of investigating into legitimate and illegiti- 
mate methods, both on and off the floors of the great 
Exchanges of the country. Since 1876 I have been con- 
stantly in touch with the practical side of Exchange life. 
As a member (admitted 1879), officer, and employe of the 
Chicago Board of Trade, I have had much to do with the 
framing and enforcing of its rules, and have closely fol- 
lowed the litigation growing out of its efforts to suppress 
bucketshops, as well as that arising from the attempts 
made by persons expelled from membership to be rein- 
stated. I have at times been astonished by the display of 
ignorance on the part of the public as to Exchange meth- 
ods, and no less surprised by the inability of Exchange 
members to explain or understand their ozvn methods. 

339 



34:0 GOLD BRICKS OF SPECULATION 

It is not to be wondered at that the people look with 
suspicion upon methods which cannot be explained by 
those practicing them. Nor is it strange that under the 
system of trading on an Exchange, such as the Board of 
Trade of Chicago, very few of its members can explain (so 
that a layman can understand them) all the details of 
transactions, settlements and deliveries. The very sim- 
plicity of the methods of trading and of delivery and settle- 
ment, all of which are done by rule, and are therefore uni- 
form in every instance, permits the settling and delivery 
to be entrusted to clerks. The member who makes the 
transaction does not have to burden his mind with the 
details, vmless some untoward circumstance arises which 
again brings the transaction to his attention. So that, like 
all incidents of life in which rule or habit governs, the 
" reason why '' is soon forgotten, and, when called u])on to 
explain, the board member displays about as much knowl- 
edge of why and how trades are settled without delivery 
and how deliveries are made as the average business man 
would of the mechanism of the typewriting machine con- 
stantly in use in his office, if asked to explain that. 

What the Exchange Is. 

The Exchange, like the typewriter, is a great labor- 
saving machine, responding to the touch of the operator. 
Like any other ■ machine whose mechanism has almost 
reached perfection, the modern Exchange is the result of 
years of careful study, experiment and practical develop- 
ment. The machinery of the Exchange can do only perfect 
work, and any departure from its rules brings disaster to 
the experimenter. It is adjusted to perform a certain ser- 
vice in a certain way, and will admit of no variations. The 
Exchanges are obliged to spend vast sums in legal con- 



IGXORAXCE OF EXCHAXCE METHODS 3il 

tests, instigated to compel them to vary from their inflex- 
ible laws. Without exception, the courts of last resort sus- 
tain their contentions that their methods are correct and 
their rules inexorable. 

All trades negotiated by members on the Exchange 
are made in accordance with its rules ; they cannot be made 
otherwise, for they would disarrange the machinery, and 
the member would be suspended or expelled, as detection 
would be certain. 

Contracts for Future Delivery. 

So far as contracts for future delivery are concerned, 
there is one and only one way to make them. All trans- 
actions are alike, are governed by the same rules, and 
the maker is subject to the penalties prescribed by the rules 
if he does not fulfill his contracts. 

The Exchange member having made a trade for future 
delivery, reports the fact to his employes, w^io thereafter 
take charge of the transaction. It is handled in exactly 
the same way as all other future-delivery trades, and it 
cannot be eliminated, settled or delivered, except in ac- 
cordance with the rules of the Exchange governing future- 
delivery contracts. These rules, as they now exist, have 
been in force for twenty years, and for twenty years prior 
they had been developing as the necessities and growth of 
the business demanded. As a consequence most of the 
persons who to-day handle the future-delivery transactions 
on the Exchange — the Exchange members and their em- 
ployes — found, when they embarked in the business, a 
perfect machine, which required of those who were en- 
titled to its services, only a strict compliance with its un- 
alterable laws. The newcomers did not ask the whys 
QT wherefores; they learned the methods not from the 



342 GOLD BRICKS OF SPECULATION 

rules, but from others who had previously traded under 
them. For out of and in conformity with the rules have 
grown up methods and customs that no man, be he ever 
so clear-headed, can master theoretically, but which, when 
put into practical operation, are so simple that a fifteen- 
year-old boy of ordinary intelligence can understand them 
in two weeks. 

This perfect and simple machine has made machines of 
those who use it. It requires no thought of them. Every 
transaction in '' futures " is the same, so far as the making 
of the transaction, the liability, the book entry, the settle- 
ment and the delivery are concerned. This has been so 
for so many years that very few Exchange members can 
explain their methods, except to say, '' They are accord- 
ing to the rules." The machine does the work for them, 
and while they know they are handling their trades cor- 
rectly, they have forgotten, if tliey ever had occasion to 
learn, the reason why it is possible and legal for them to 
so transact their business. 

Misconceptions by the Public. 

Exchange methods do not require a defense; but the 
public mind is confused by the utterances of a misin- 
formed press, paid attorneys, and irresponsible dema- 
gogues. To the public there has for many years been due 
a clear and concise explanation of what constitutes a 
" future-delivery " trade on an Exchange, why it is in no 
sense gambling, and why it is impossible to make a gam- 
bling transaction on a legitimate Exchange that enforces 
its rules. When I say that Exchange methods do not re- 
quire a defense, it is in the light of the decisions of the 
Supreme Courts of the United States and of all States in 
the Union. The Supreme Court of Illinois has said : 



IGXORAXCE OF EXCHANGE METHODS 343 

" Legitimate transactions on the Board of Trade are of the 
utmost importance in commerce. Such contracts, whether for 
immediate or future deHvery, are vahd in law, and receive its 
sanction and all the support that can be given them." 

And the world over, such contracts are recognized and 
sustained. 

Aware of a condition of public opinion that is preju- 
dicial to a great interest, and which I know is the result 
of erroneous statements or methods that are misunder- 
stood, it is important that I should exert myself to expose 
the error and thus lead public sentiment aright, for, in the 
words of Lincoln: 

" A\"ith public sentiment nothing can fail ; without public senti- 
ment nothing can succeed. Consequently he who moulds public 
sentiment goes deeper than he who enacts statutes or pronounces 
decisions. He makes statutes and decisions possible to be executed." 

Therefore, this is in no sense a defense, but an ex- 
planation of a system of such great value to agriculture, 
to commerce, and to the public generally that it is time it 
received the sanction of the press and the people, as it al- 
ready has of the courts. 

It is the speculative side of the Exchange trading that 
calls forth criticism and is misunderstood. Therefore, I 
shall touch but lightly . on the cash transactions, as they 
require no explanation. 

Immensity of Board of Trade Transactions. 

At this point, however, I wish to impress upon the 
reader the fact that the members of the Chicago Board 
of Trade handle in various ways on the Chicago market 
(including live stock, which they slaughter, and much of 
which, in the form of manufactured products, is sold on 
the Exchange), about $500,000,000 worth of farm prod- 



344 GOLD BRICKS OF SPECULATION 

ucts annually. In addition to this vast business, many 
of the larger firms and corporations have found it advan- 
tageous to establish branches and to operate immense grain 
warehouses and packing houses at various grain and pack- 
ing centers such as Kansas City, Omaha, Minneapolis, St. 
Louis, etc., and lake and sea ports, such as Milwaukee, 
West Superior, Duluth, Buffalo, Galveston, New Orleans, 
etc. They also have acquired smaller grain warehouses 
along the lines of the railroads in the West and Northwest, 
where they buy grain direct from the farmer. In some 
instances one concern will operate as many as one hun- 
dred of these smaller warehouses. So that it is a conserva- 
tive estimate to say that the members of the Board of 
Trade of Chicago act as a medium through which $700,- 
000,000 worth of the products of the farm are annually 
marketed in the United States. 

The risk incident to handling this enormous volume of 
business would stagger conservative business men, and 
the margin of profit would have to be liberal to induce 
capital to engage in handling and carrying the products 
of our farms from the producer desirous of selling his 
crops as soon as harvested, and his hogs as soon as they 
are ready for market, on the one hand, and the consumer 
buying sparingly during the balance of the year, on the 
other, if it were not for the much condemned speculative 
side of the Exchange. The " future " market not only 
makes it possible to handle this enormous business with 
safety and without speculative risks, but also enhances the 
first selling value of these farm products at least 5 per 
cent by reason of the ability of the buyer of the property 
to eliminate practically all chance of loss that might result 
rom a decline in values, by resorting to the speculative 
market for protection, 



IGNORANCE OF EXCHANGE METHODS 345 

I believe all this can be made plain, and I shall under- 
take to show that the speculative market for farm products 
is of immense value, especially to the agricultural inter- 
ests. 



UQ GOLD BRICKS OF SPECULATION 



CHAPTER II. 

commercial exchanges. 

The Chicago Board of Trade. 

Why Exchanges are established ; brief history of Chicago Board of 
Trade ; rules to protect the public ; value of strict discipline as 
demonstrated by increased business, value of privilege of mem- 
bership and self-respect of members. 

Boards of Trade and Stock Exchanges are not organ- 
ized for the transaction of business nor for pecuniary gain, 
but to maintain exchange halls and to promulgate and 
enforce amongst their members correct and high moral 
principles in the transaction of business. Exchanges dif- 
fer but slightly in their objects, rules and regulations; 
hence in this chapter I shall deal with the Board of Trade 
of the City of Chicago, the greatest grain and provision 
Exchange in the world, and the Exchange which enforces 
its rules more consistently than any other similar associa- 
tion in the United States. 

This Board was organized as a voluntary association 
in April, 1848, with seventy-nine members. In 1850 it 
w^as re-organized under the General Incorporation laws 
of the State, and again in 1859 under a special charter 
granted by the State of Illinois. At the time of its organ- 
ization it adopted the following as its objects : 

" To maintain a Commercial Exchange ; to promote uniformity 
in the customs and usages of merchants ; to inculcate principles of 
justice and equity in trade ; to facditate the speedy adjustment of 
business disputes ; to acquire and to disseminate valuable commer- 
cial and economic information ; and generally to secure to its mem- 
bers the benefits of co-operation in the furtherance of their legiti- 
mate pursuits." 



COMMERCIAL EXCHANGES 347 

And it has maintained these objects without change 
through all its history. 

Under its charter it " has the right to admit or expel 
such persons as it may see fit," and, in the language of its 
counsel, '' its right to discipline its members is its greatest 
asset." 

In the last forty years numerous attempts of expelled 
or suspended members to be reinstated by appealing to the 
courts have failed utterly. The Supreme Court of Illinois 
has refused to interfere with the disciplinary power of the 
Board over its members, and, in language unmistakable, 
denied relief in every instance, on the theory so clearly ex- 
pressed in the case of Nelson vs. the Board of Trade of 
Chicago that it is here quoted: 

" '■' "^ '^ The right to pursue a business, as a member of such 
an organization, in the hall of the building devoted to that purpose, 
may be a thing of value, but its value is incidental to the member- 
ship, and a determination of such membership destroys the rights 
under it. The corporation is not bound to admit any person to 
membership, nor was the relator in any way forced into such asso- 
ciation. He voluntarily became a member, and by his contract is 
bound to abide by the rules and regulations of the board. The 
courts will never interfere to control the enforcement of by-laws 
of such association, but they will be left to enforce their rules and 
regulations by such means as they may adopt for their" govern- 
ment. * ^- * The relator was suspended by a tribunal which 
he had voluntarily chosen to determine the question and according 
to the rules to which he assented in becoming a member, and he 
had due notice of the proceedings. Such a judgment cannot be 
collaterally reviewed by the courts. So far as the courts are con- 
cerned, the judgment of the board of directors is conclusive, like 
that of any other tribunal. * -^ "^^ The petitioner showed a case 
with which the court was powerless to interfere." 

The agreement signed by members of the Board of 
Trade upon their admission to the Board is as follows : 



348 GOLD BRICKS OF SPECULATION 

'' We, the undersigned, members of the Board of Trade of the 
City of Chicago, do, by our respective signatures and by virtue of 
our membership in said corporation, hereby mutually agree and 
covenant with each other, and with the said corporation, that we 
will in our actions and dealing with each other and with the said 
corporation, be in all respects governed by and respect the rules, 
regulations and by-laws of the said corporation as they now exist, 
or as they may be hereafter modified, altered or amended." 

The Charter further authorizes the corporation " to 
estabhsh such Rules, Regulations and By-Laws for the 
management of their business and the mode in which it 
shall be transacted, as they may think proper." 

In the early stages of the Board's development the 
membership fee was $5. The rules were simple and few. 
But as Chicago grew and the grain and live stock business 
increased, the importance of the Board of Trade was recog- 
nized. The machinery for the expeditious and economical 
handling of the ever-increasing volume of business was 
perfected. A membership became a valuable privilege and 
an elaborate code of rules was necessary. It was not until 
late in the 70' s that a privilege of membership could be 
transferred from one person to another. As late as 1881 
the Board of Trade admitted 143 new members on the pay- 
ment of an initiation fee of $1,000 for the first seventy- 
four and $2,500 for the balance, sixty-nine. This increased 
the membership to 1,936. The initiation fee w^as then ad- 
vanced to $10,000, but as memberships had been made 
transferable in 1876, persons desiring to join the Board 
found no difficulty in acquiring a membership from retiring 
members. Notwithstanding the great increase in member- 
ship, the value of the privilege advanced rapidly and in the 
early part of 1882 reached a maximum of $4,400 — ten 
years prior, in 1872, the membership numbered 1,354, the 
initiation fee was $100, and the privilege was not trans- 




By pcnitission of Armour Grain Co 



A GRAIN STORAGE AND CI 

Storage Capacity 7,r)00,000 Bushels; Cost $2,000,000. 11 
Total Storage Capacity of Chicago ( i 




[NG PLANT IX CHICAGO. 

our Warehouses Owned and Operated by One Concern. 

irehouses about 70,000,000 bushels. 



COMMERCIAL EXCHANGES 349 

ferable. Tliis great advance in number — 582 — and value 
— over $4,000 each — of the memberships, in ten years, was 
in keeping with the development of the business. But it 
soon became evident that the mem1)ership, while consistent 
with prosperous and active conditions, was excessive in 
periods of depression and dullness. There followed a de- 
cline in value, covering a period of about fifteen years, 
the minimum price, $475, being reached about 1895. From 
this point there was some improvement and in January, 
1900, $750 to $800 w^as the ruling value. 

During the last two months of 1899, scandalous devel- 
opments, involving officers and prominent members of the 
Board, brought the better element to a realizing sense 
of the causes of the depression in their business, with the 
result that reforms were instituted intelligently and suc- 
cessfully by an able and fearless directory, backed by a 
membership determined to prevent a recurrence of previ- 
ously unhealthy conditions. 

The price of memberships advanced to $4,350 within 
two years and at present, August, 1903, is cjuoted at 
$3,400. 

In the twenty-two years since 1881 the number of mem- 
berships has decreased by expulsion, lapses and retirement 
by purchase, just 143 — the increase in the year 1881 — and 
the number now is 1,793. 

As before stated, the Board of Trade does not transact 
any business, but it maintains at an annual expense of 
about $240,000 an Exchange hall, wherein its members 
may meet daily and transact their business. The neces- 
sary revenue is derived largely, but not entirely, from 
yearly assessments of its members. 

In order to further carry out the objects of its organ- 
ization, the Board adopted rules and regulations tending 



350 GOLD BRICKS Of SPECULATION 

to promote all of the purposes named. Any deviation from 
these rules on the part of a member is punishable by sus- 
pension or expulsion from all the privileges of the Ex- 
change. Expulsion is the absolute loss of membership. 
Suspension is the deprivation of all privileges of member- 
ship, either for a fixed period or until all claims against 
the member are satisfactorily adjusted and settled. 

With a membership of i,8oo men, all of whom the 
organization must keep up to a high standard of commer- 
cial honor in order that it may be a self-respecting and re- 
spected Commercial Exchange, is it any wonder that its 
counsel should argue that '' its right to discipline its mem- 
bers is its greatest asset? " 

While exercising the utmost caution in the admission 
of members, the Chicago Board of Trade finds it necessary 
to expel on an average about five members a year for viola- 
tions of its rules, dishonest acts, or grave offenses involving 
the good name and dignity of the Association. A greater 
number are suspended for periods varying from thirty 
days to twenty years, according to the gravity of the of- 
fenses committed. 

Rigid and summary discipline, which results in the loss 
of a valuable privilege, as well as a business reputation, 
is the most effective implement of the Exchange. Unless 
such discipline is administered fearlessly and impartially, 
the members and the public suffer from the cunning and 
dishonesty of the few knaves, who, if permitted, will use 
the Exchange merely as a cloak to hide their '' bucket- 
shopping " and other nefarious practices. 

Show me the list of expulsions and suspensions of mem- 
bers by an Exchange and I w^ll tell you its members' meth- 
ods in dealing with the public. If it fails to exercise this 
important and necessary function, it is not for lack of occa- 



COMMliRCIAL EXCHANGES 351 

sion, but by reason of the loose methods that prevail and 
are winked at. Hiere never was, and ])ro1)ably never will 
be, an association of men, struggling for gain, in which 
there was not a small percentage of rogues. To weed out 
the rogues is the duty of the Exchange. Failing to do so, 
it is not entitled to the confidence of the public. 

The darkest days in the history of the Chicago Board 
of Tiiftde were those in the years 1898 and 1899 when dis- 
cipline was lax. Its brightest and most prosperous days 
have been in the years when, awakened from its lethargy, 
it threw^ the rascals out and could again look the world in 
the face. 

As the purpose of such knaves who succeed in acquir- 
ing memberships in Exchanges is to rob the public, they 
usually establish themselves as commission merchants or 
brokers and solicit the patronage of the public, whom they 
systematically defraud. This is the most common offense 
against Exchange rules, as the customer is an easy prey, 
owing to the necessity of his relying absolutely on his 
broker. 

The Chicago Board of Trade exerts itself to protect 
the clients of all its members against fraud and provides 
severe discipline in case of conviction. Personally, as a 
member of the Board, and officially as a member of various 
committees, I have preferred charges against and suc- 
ceeded in expelling more than fifteen members for this 
particular kind of dishonesty. Several others I have suc- 
ceeded in suspending for various terms; but the usual 
penalty in case of dishonest treatment of a customer is ex- 
pulsion, it being a fixed policy of the Board to give no quar- 
ter to a member who violates his sacred obligations to the 
client who trusts him. 



352 GOLD BRICKS OF SPECULATION 

Rules to Protect the Public. 

The rules especially intended to protect the customer, 
while few and simple, are very effective. Section 12 of 
Rule XXII reads as follows: 

'' Whenever a member of the Association, acting- on his own 
behalf or as the representative of a firm or corporation, shall have 
made a purchase or sale for another party for future delivery of con- 
tract grades of commodities dealt in on the Exchange, such member 
or the firm or corporation of which he is the representative, as the 
case may be, shall notify the party for whoni such purc^iase or sale 
was made, of the price at which and the party with whom such pur- 
chase or sale was made, such notice to be in writing and to be given 
upon the day of such purchase or sale. A non-compliance with the 
requirements of this section shall be deemed uncommercial conduct 
and punishable, in the discretion of the Board of Directors, by sus- 
pension or expulsion from membership in this Association under the 
provisions of Rule IV. 

" Such non-compliance shall not invalidate any such contract or 
purchase or sale." 

It is intended to provide against the sending of false 
statements to customers. If '' A," residing in Omaha, 
wires " B," his broker on the Board of Trade, to buy 5,000 
bushels May wheat for his (" A's ") account, and '' B " 
executes the order, he must, under penalty of suspension 
or expulsion from the Board, send to " A " by mail on 
the same day a written notice of the purchase, giving the 
amount, price and name of the party on the Board of whom 
he C B ") made the purchase. This enables ''A" to 
verify, at any time in the future, the transaction reported 
to him by "B." 

The rule prohibiting bucketshopping and its kindred 
evils is Section 8 of Rule IV and is as follows : 

" Section 8. Any member of the Association who shall be inter- 
ested or associated in business with, or who shall act as the repre- 
sentative of, or who shall knowingly execute any order or orders for 



COMMERCIAL EXCHANGES 363 

the account of any organization, lirni or individual engaged in the 
business of dealing in differences on the fluctuations in the market 
price of any commodity or corporate stock — without a hoiia fide pur- 
chase and sale of the article for an actual delivery ; or who shall be a 
member of, or shall, in his own behalf, or as agent, directly or indi- 
rectly make, execute, or give any orders for a trade or transaction 
in or upon any bucketshop or any so-called exchange, wherein is 
conducted or permitted the business aforesaid, or who shall know- 
ingly accept, either directly or indirectly, from any member of any 
so-called exchange, wherein is conducted or permitted the business 
aforesaid, any orders for trades or transactions to be executed in the 
Exchange Hall of this Association, shall be deemed guilty of unmer- 
cantile conduct, which renders him unworthy to be a member of the 
Association ; and upon complaint to and conviction thereof by the 
Board of Directors, he shall be expelled from membership in the 
Association. Any member who shall, directly or indirectly, become 
or continue a member of, or in his own behalf or as agent make any 
trade upon, or otherwise contribute to the maintenance of, or accept 
any orders to be executed upon the exchange of this Association 
from any member of a market or exchange in the city of Chicago, 
permitting the distribution of its quotations covering the com- 
modities dealt in upon the Exchange of this Association, without 
imposing and enforcing prohibitions upon the use of such quotations 
in bucketshops, such as are imposed by this Association upon its 
quotations, shall, upon complaint to, and conviction thereof by the 
Board of Directors, be expelled from membership in this Associa- 
tion. 

*' All orders received by any member of this Association, firm or 
corporation doing business upon the Board of Trade of the City of 
Chicago, to buy or sell for future delivery any of the articles or com- 
modities dealt in upon the floor of the exchange (except when in 
exchange for cash property) must be executed in the open market in 
the Exchange Hall during the hours of regular trading, and under 
no circumstances shall any member, firm or corporation assume to 
have executed any of such orders or any portion thereof by taking 
the trades, or any portion of any of them, for their own account, 
either directly or indirectly, in their own name or that of an employe, 
broker or other member of the Association. Any member convicted 
of a violation of this rule bv the Board of Directors shall be ex- 
pelled." 

The first part of this section prevents any connection 



354 GOLD BRICKS OF SPECULATION 

between members of the Board and bucketshops, or " fake " 
Exchanges. The second part makes it obhgatory upon 
members to fill all orders in the open market by making a 
bona fide transaction with some other member of the Ex- 
change in no way, directly or indirectly, connected with 
him. Section ii of Rule IV throws a still further safe- 
guard arotmd the transactions made on the Exchange. 
It is as f ollow^s : 

" No member of this Association is allowed under any cir- 
cumstances to be both principal and agent in any transaction in any 
of the commodities dealt in under the rules of this Board. Further- 
more, no member of this Association in any transaction in any of the 
commodities dealt in under the rules of this Board shall allow him- 
self directly or indirectly, either by his own act or by the act of an 
employe or of a broker or other member of the Association, to be 
placed in the position of agent for both seller and buyer. 

" This section shall not apply in case of exchange of cash prop- 
erty." 

The penalty provided for a violation of this rule is 
suspension for not less than one year for the first offense 
and expulsion for the second offense. 

In addition to the rules already quoted, the Board has 
seen fit to provide still further for ])unishment of members, 
who in any manner not mentioned in the above rules, prac- 
tice dishonest methods. 

Section 9 of Rule I\^ among other things, provides 
that: 

'' When any member shall be guilty of making or reporting any 
false or fictitious purchase or sale, or when any member shall be 
guilty of an act of bad faith, or any attempt at extortion, or of any 
dishonest conduct, he shall be expelled by the Board of Directors.'' 

So that persons trading with or through a member of 
the Board of Trade of the City of Chicago have all the 
protection that it is possible for the Board to extend to 



COMMERCIAL EXCHANGES 355 

them, and the assurance that dishonesty will be punished 
by expulsion from membership, which means the end of 
the career of the dishonest broker as a broker on the Board. 
Complaints against members can be niade by non-mem- 
bers to the Board of Directors, whose duty it is under the 
rules to appoint a committee to investigate, and, if the 
evidence is sufficient, to file charges against the offending 
member. The directors then hear the case and decide upon 
the guilt or innocence of the accused. 

Strict Enforcement of Rules Pays. 

The policy of the Board of Trade is well expressed in 
a recent brief of its attorney, in a case where an expelled 
member was endeavoring to induce the courts to reinstate 
him. (He did not succeed.) It read thus: 

" * ""^^ "^ This body has now i,8oo members. One of its 
objects is to keep all of its members up to a ' high standard of com- 
mercial honor.' This is no small task in these days, when the dollar 
is ever becoming a more potent motive in business, where old-style 
honesty is fast going out of fashion, where self interest is fast ac- 
quiring dominance over principle, when ' bucketshopping ' and 
' skinning ' customers is becoming more venial and more frequent. 
Now, more than ever, does this Board of Trade need the untram- 
meled power of rigid discipline. Thus only can it fill its public pur- 
pose. Its power of discipline, like that in the army, must be sum- 
mary. If, whenever it is exercised, it is to be reviewed by slow 
proceedings in courts, and the elaborate system of formal proof there 
permitted, there necessarily will be fewer attempts to discipline, and 
accordingly more opportunities for ' easy consciences ' to lower the 
standard of commercial morality. The importance and value to this 
Board of this disciplinary power may be appreciated, if we bear in 
mind that during the year 1900 five members were expelled and 
twelve others suspended for ' bucketshopping ' and other uncommer- 
cial conduct. * * *" 

Can the public ask for any better assurance of the good 
faith of the Chicago Board of Trade? 



356 GOLD BRICKS OF SPECULATION 

I'regret to say that all the Exchanges are not so jealous 
of their reputations. " Easy consciences " and a low 
" standard of commercial morality " control, or, to be 
charitable, moral courage and a proper appreciation of 
good business ethics are lacking. Therefore, their rules, 
not being enforced, are " dead letters." 

Strange how humanity is prone to stand in its own 
light. Individuals, associations and communities, well 
kn.owing their duty and what is best for them, still lack 
the moral courage to assert themselves, even though they 
individually or collectively suffer pecuniary loss, personal 
discomfort, or unfair competition in their legitimate pur- 
suits, all of which could be remedied by firm and fearless 
action on the part of the suffering party. For crime or 
fraud cannot stand the light of day or justify or maintain 
its position when it meets intelligent resistance. But 
stranger still is the absence of this moral courage and 
willingness to combat and correct evils in the case of Com- 
mercial Exchanges, where it pays in dollars and cents to 
uproot abuses. This theory was demonstrated clearly in 
the case of the Chicago Board of Trade and has attracted 
national comment. More than two years ago The Coiii- 
mercial West of Minneapolis made the following com- 
ment on the profitableness of good ethics in trade : 

Memberships on the Chicago Board of Trade are to-day quoted 
at $2,800. The price eighteen months ago was $800. There has, 
therefore, been an advance of $2,000 on eacli membership, which 
amounts to 250 per cent. 

There are eighteen hundred members of the Chicago Board of 
Trade. An advance of $2,000 per membership represents an aggre- 
gate gain to the members of the Chicago Board of Trade of $3,600,- 
000. 

What has been the cause of such a great gain in Board of Trade 
memberships, amounting to 250 per cent, and to the enrichment of 
members in the aggregate by the fat sum of $3,600,000? 



COMMERCIAL EXCHAXGES 357 

It seems a true and very interesting instance of how good ethics 
can count in good dollars and cents, of how the triumph of high 
moral principles in business can be financially measured in millions 
of dollars. 

Since January of 1900 the Chicago Board of Trade has had not 
only an able, high-minded, and aggressive president in Mr. Warren, 
but a Board of Directors that has been representative of the highest 
conscientiousness and intelligence of the membership. The present 
Board of Directors is probably the best the Chicago Board of Trade 
ever had. It in no way detracts from the credit due Air. Warren 
for the achievements of his administration, to acknowledge that they 
would not have been possible but for the cordial co-operation of the 
directors. 

No longer are there men in the directorate of the Chicago Board 
of Trade who ought to be under criminal recognition. Xot only 
has the policy of President Warren been vigorous in its opposition 
to scandalous practices on the Board of Trade, but it has been vig- 
orously upheld by men not in collusion with bucketshops and 
thieves, as were some of their predecessors. 

The last eighteen months has seen the practical end of bucket- 
shopping in Chicago. It has seen a good beginning to the end of 
bucketshopping throughout the United States, thanks to the Chicago 
Board of Trade alone, for it has carried out its great fight against 
bucketshops alone, unaided and unsympathized w^ith by any other 
exchange of the country. It has seen members of the Board of 
Trade who considered knavery and commercialism synonymous, ex- 
pelled and in some instances, evidence of their knavery furnished for 
their conviction in the criminal courts. It has seen the enactment of 
a mandatory rule that the directors shall expel any member wdio 
shall charge commissions of less than one-eighth per cent on a round 
transaction. This rule already has cost one prominent member his 
membership, and will cost any one else the same, wdio attempts cut- 
ting commissions. From the standpoint of commercial morality, 
this rule is of the highest importance. It gives every member of the 
Board of Trade an opportunity to make fair profits from an honest 
business. In the days when commissions w^ere cut in some instances 
to as much as one-sixty-fourth of one per cent, there was small profit 
from honorable business, but a premium on knavery such as made 
the Chicago Board of Trade infested with sharpers and the cheap 
refuse from other fines of business. 

The Chicago Board of Trade now stands in public respect as it 



358 GOLD BRICKS OF SPECULATION 

has never stood before. Its members are doing an honorable busi- 
ness at good profits. 

President Warren of the Board of Trade does not believe that 
memberships have by any means yet reached the top. He predicts 
that $5,000 will be reached, if the state supreme court shall decide 
this month or next the Dickinson commission cutting case in favor 
of the Board of Trade's power to expel, and if several important 
decisions on the bucketshop cases, also expected very soon, are ren- 
dered as anticipated. 

In conversation with the correspondent of The Commercial 
West he said quite recently : " The point about these advances in 
memberships that I think especially gratifying is that as they become 
more valuable the ow^ners of them become more careful to keep 
from having them forfeited. That in itself is a great aid to cultiva- 
tion of proper sentiments and honorable methods among Board of 
Trade men." 

In discussion of this interesting enrichment of Board of Trade 
members through good ethics, mention should be made not only of 
President Warren and his good board of directors, but of John Hill, 
Jr., whose work as a bucketshop fighter has been attended with sig- 
nal success. There are few men who could have had the earnest, 
steadfast enthusiasm to w^ork for the cause of common decency the 
way John Hill has. amid the circumstances of great discouragement. 
No plan to discredit him has been left untried. The " big four " in 
the directory, previous to the W'arren administration, did every- 
thing it could to hamper and annoy him in his work. With good 
foresight, these directors felt that when Mr. Hill was through with 
the '' small fry " of rascals, he would be after them, and so it proved. 
Even in those trying days Mr. Hill accomplished a great deal. But 
it has been within the last two years, that by good backing, he has 
produced best results. 

This could b.e enlarged upon at the present time, for the 
prosperity of the Board has continued and will continue so 
long as it maintains " high moral principles in business " 
by enforcement of its rules. Subsequent to the publication 
of this matter, memberships advanced to $4,350 and repre- 
sented an aggregate gain to the members of v$6, 300,000. 

In the opinion of the writer, it will not be many years 



COMMERCIAL EXCHASCES 359 

before the broker or coininission merchant soHciting busi- 
ness will not only have to show to his prospective customer 
that he is a member of an Exchange, but also that the Ex- 
change of which he is a member enforces its rules rigidly. 



360 GOLD BRICKS OF SPECULATION 



CHAPTER III. 

Chicago's growth as a grain, provision and seed mar- 
ket (1838-1901). 

Shown by Receipts and Shipments. 

Volume of the products of the farm marketed in Chicago; un- 
paralleled growth of the market as shown by receipts and ship- 
ments. 

For ahiiost fifty years Chicago has been the greatest 
grain market in the world, and there is no reason why it 
should not maintain this position. It is also the greatest 
live-stock market in the world. These facts are generally 
known and will not have a fresh interest for most readers ; 
but very few have seen the figures which indicate the 
enormous growth in the volume of business, with the re- 
sulting necessity for a broad, active and safe market. Im- 
mense capital is employed, and the best business minds and 
most intelligent labor is required in the economical han- 
dling of what is probabty the most extensive business in 
the world, and all of which centers in the Board of Trade. 

Early in the history of Chicago, and before the advent 
of the railroad and the completion of the Illinois & Mich- 
igan Canal, Chicago received its produce from the farmer's 
wagon. So that, prior to 1853, there was no record of the 
receipts of grain or hogs; but as early as 1838 there was a 
record of shipments of grain, which in that year mounted 
up to seventy-eight bushels. From this small beginning, 
shipments reached the vast proportion of 287,000,000 
bushels in 1898, while the railroad and canal, which had 
superseded the farm wagon, brought into Chicago 349,- 
000,000 bushels of grain in the year 1900. 



CHICAGO'S GROWTH AS A MARKET 361 

The comments of the early historians of Chicago, when 
read to-daj^, will illustrate even more forcibly the wonder- 
ful growth of the market. In Ulinois as It Is, by Fred 
Gerhard, 1857, the following paragraphs appear. 

COMMERCE AND MANUFACTURES OF CHICAGO. 

In comparing Chicago, as it was a few years since, with Chicago 
of to-day, we behold a change whose veritable existence we would be 
inclined to doubt, were it not a stern, indisputable fact. Rapid as 
is the customary development of places and things in the United 
States, one will yet be forced to admit that the grow^th of Chicago 
and her trade stands without a parallel. Chicago, now hardly 
twenty years old, whose port in 1831 was frequented by four small 
vessels, two brigs and two schooners, then fully adequate to satisfy 
the commercial wants of Northeastern Illinois and Northwestern 
Indiana together, in 1855 witnesses, beating in her harbor, 6,610 
vessels of 1,608,845 tons burden, and in the same year exported 
more grain than any other commercial emporium throughout the 
world. Chicago, which in 1823 was but a wretched village of ten 
frame huts and sixty inhabitants, in 1855 numbered 83,509 inhabit- 
ants, and in the same year dealt more largely in timber than the mar- 
kets, hitherto the most considerable in the world, could boast of. 

The wheat crop of Illinois, amounting, as it does, to 20,000,000 
bushels, has secured to Chicago its prominent position among the 
grain-exporting commercial cities. In 1855, Chicago exported 
twice as much grain as Galatz and Braila, the great wheat empori- 
ums of the Danube, and four times as much as Dantzic, the place of 
export of the Polonian wheat. 

The following comparison of those cities in Europe which pos- 
sess the largest corn-trade with Chicago, will place the great im- 
portance of Chicago in this respect beyond a doubt : 

Indian Oats, Rye and 
18^4. Wheat Bu. Corn Bu. Baidey Bu. Total Bus. 

Odessa 5,600,000 1,440,000 7,040,000 

Galatz and Braila.... 2,400,000 5,600,000 320,000 8,320,000 

Dantzic 3,080,000 1,328,000 4,408,000 

St. Petersburg 7,200,000 

Archangel 9,528,000 

Riga 4,000,000 

Chicago 3^644,860 6,837,899 3419.551 12,902,310 

Chicago, 1855 .;.... 7,115,250 7,517,625 2,000,938 16,633,813 



362 GOLD BRICKS OF SPECULATION 

And yet the present position of Chicago is only the beginning of 
the beginning. 

In Chicago's Relations to the Great Interior and Con- 
tinent, by J. S. Wright, 1870, is found, reprinted from a 
report of the Buffalo Board of Trade of 1863, the follow- 
ing : 

REPORT. 
-In 1800, in all the territory west of New York and Pennsylvania 
and northwest of the Ohio River, there were no considerable settle- 
ments except in Ohio, which was then a territory containing a popu- 
lation of only 45,365. There was, by the census of i860, in the lake 
basin, a population of 9,474,358, against 4,100,425 in 1840 and 
6,080,609 in 1850. 

The cereal product of the lake-basin States was, in 1840, 267,- 
265,877 bushels; in 1850, 434,863,661 bushels; in i860, 679,031,559 
bushels; in 1862 (estimated), 900,000,000 bushels. 

hi 1840 the surplus cereals moved to the seaboard out of the lake 
basin were about 5,000,000 of bushels, against 145,000,900 bushels 
in 1862. 

The Erie Canal and the Mississippi River were, from .1825 to 
1838, the only avenues of transportation for the products of the west 
to the seaboard. The surplus cereal products exported from these 
states bordering on Lake Erie, including flour estimated as wheat, 
were all included in the receipts at Buffalo, which receipts in 1836 
were only 1,239,357 bushels. 

The first grain received at Buffalo from Lake Michigan was in 
1836, being a small cargo of 3,000 bushels of wheat from Grand 
Haven, ^hchigan, by the brig " John Kinzie," R. C. Bristol, master. 
The first grain received at Buffalo from Chicago was a small cargo 
of 1,678 bushels of wheat shipped by Newberry & Dole, of Chicago, 
October 8, 1839, on the brig '* Oceola," Francis B. Billings master, 
and consigned to Kingman & Durfee, Black Rock, now North 
Buffalo. 

In the year 1862, the surplus cereals exported from Lake Michi- 
gan, were, from Chicago, 57,676,741 bushels; from Milwaukee, 
18,723,000 bushels; other ports (estimated), 10,000,000, making a 
total of 86,399,741 bushels. 

Such are the changes of less than twenty-five years. With such 
results before us, what may we reasonably expect will be the in- 
crease of the next succeeding twenty-five years, when all the cir- 



CHICAGO'S GROJVTH AS A MARKET 363 

ciimstances are so much more favorable than were those of twenty- 
five years ag:o ? 

Mr. Gerhard's tables were compiled for 1855, when 
Chicago astonished the world by the grow^th of its grain 
shipments. The increase since that date has been seven- 
teenfold. Since 1^62, the year to which Mr. Wright called 
attention, this wonderful market has shipped in one year 
hvt times as much grain as in any year prior to that time. 
A glance at the statement below will show the develop- 
ment of the market as indicated by the receipts and ship- 
ments of grain — of all kinds — and flour, the latter reduced 
to bushels of wheat : 

STATEMENT OF CHICAGO RECEIPTS AND SHIPMENTS 
OF GRAIN FOR A SERIES OF YEARS. 

Total Receipts. Total Shipments. 

Flour reduced to wheat, bu. Flour reduced to bu. 
1838 78 

1839 3-678 

1840 10,000 

1841 40,000 

1842 586,907 

1843 688,967 

1844 923494 

1845 1,025,620 

1846 1,599,819 

1847 2,243,021 

1848 3.001,740 

1849 2,895,958 

1850 1,830,968 

1851 4,646,831 

1852 5,826,437 

1853 6,928,459 6,292,233 

1854 15,725,135 ' 13,132,501 

1855 20,367,702 16,632,750 

1856 24,512,454 21,610,312 

1857 21,659,109 18,483,678 

1858 23,610,293 20,587,189 

1859 19,372,986 16,754,136 

i860 37,235,027 31,108,759 



364 GOLD BRICKS OF SPECULATION 

1861 53,427,365 50,481,862 

1862 , 57,650,804 56,477>i 10 

1863 57,660,722 54,287,345 

1864 49,848,908 46,718,543 

1865 54,950,114 52,268,181 

1866 68,396,423 65,486,323 

1867 60,215,774 55.187,909 

1868 69,680,233 63,688,358 

1869 63,417,510 56,759.515 

1870 60,432,574 54,745,903 

1871 83,518,202 71,800,789 

1872 88,426,842 83,364,224 

1873 • • • • 98,935413 9i'597.o92 

1874 95,611,713 84,020,691 

1875 81,087,302 72,369,174 

1876 -97,735,482 87,241,306 

1877 94,416,399 90.706,076 

1878 134,086,595 118,675,469 

1879 137,704,571 125,528,379 

1880 165.855,370 154,377,115 

1881 146,807,329 140,307,597 

1882 126,155,483 114,864,933 

1883 164,924,732 141,720,259 

1884 159,561,474 138,652,155 

1885 156,408,228 135,587,921 

1886 151,932,995 129,636,678 

1887 163,437,724 151,658,224 

1888 182,588,188 156,659,986 

1889 183,563,203 i79'035'997 

1890 219,052,518 204,674,918 

1891 231,821,430 207,987,762 

1892 255,832,556 216,182,008 

1893 246,942,966 198,791,216 

1894 187.553469 148,638,822 

1895 189,432,819 171,464,137 

1896 253,802,134 219,710,781 

1897 296,767,1 16 252,624,402 

1898 320,436,357 287,403,904 

1899 320,670,441 246,369,099 

1900 349.637.'295 265,552,246 

1901 291,252,936 226,561,477 



CHICAGO'S GROWTH IS A MARKET 3G5 

The packing- of hogs at Chicago and in the West is 
also given to show the enormous increase in the packing 
industry in hah' a century. This does not inckide the 
hogs received at Chicago and shipped out again, which in 
1 90 1 numbered 1,416,000: 

COMPARATIVE STATEMENT 

Of the Packing in the West and at Chicago for a series of years. 



Years ending: In 


In the 


Years en 


difig In 


In the 


March 


/. Chicago. 


West. 


March 


I. Chicago. 


West. 


iS54- . 


52,849 


2,534,770 


1878. 


... 4,009,311 


9,045,566 


1855- • 


73.694 


2,124.404 


1879. 


. . . . 4,960,959 


10,853,693 


1856. . 


80,380 


2,489,502 


1880. 


. . . . ^,680,637 


10,997,399 


1857.- 


74,000 


1,818,468 


1881. 


•... 5,752,191 


12,238,354 


1858.. 


99,262 


2,210,778 


1882.. 


. . . 5,100,484 


10,551,449 


i8=;9. . 


. . . 179.684 


2,465.552 


1883.. 


. . . 4,222,780 


9,340,999 


i860. . 


. •• 151.339 


2,350,822 


1884., 


.... 3,911,792 


9,183,100 


1861.. 


271,805 


2,155,702 


1885.. 


. . . 4,228,205 


10,519,108 


1862.. 


. . . 505,691 


2,893,666 


1886. . 


.... 4.928,730 


11,263,567 


1863.. 


. . . 970,264 


4,069,520 


1887. . 


, ... 4.425.941 


12,083,012 


1864. . 


. . . 904.659 


3,261,105 


1888. , 


, ... 3,732,244 


11,532,707 


1865.. 


• • . 760,514 


2,422,779 


1889. . 


, ... 3,218,415 


10.798,974 


1866.. 


. . . 507.355 


1,785,955 


1890.. 


•••• 4,473,467 


13,545,303 


1867. . 


. . . 639,332 


.2,490,791 


1891.. 


... 6,071,659 


17,713.134 


1868.. 


796,226 


2,781,084 


1892.. 


... 5,249.798 


14,457,614 


1869. . 


• • • 597.954 


2499,173 


1893.. 


. .. 4.352,095 


12,390,630 


1870. . 


. . . 688,149 


2,595,243 


1894. . 


... 4,219,567 


11,605,006 


1871. . 


. . . 919,197 


3,832,084 


1895.. 


. .. 5,293,202 


16,003,645 


1872.. 


. . 1,225,236 


5,125,560 


i8q6. . 


• .. 5,490,410 


15,010,635 


1873.. 


. .. 1,456,650 


5,956,254 


1897.. 


••• 5.967,595 


16,928,978 


1874.. 


. . . 1,826,560 


6,525,616 


1898.. 


. . . 6,747,265 


20,201,260 


1875.. 


• • • 2,136,716 


6,761,670 


1899.. 


. . . 8,016,675 


23.651,695 


1876.. 


. . . 2,320,846 


6,150,342 


1900. . 


... 7,119,440 


22,201,000 


1877.. 


. .. 2,933,486 


7.376,858 


1901 . . 


... 7,268,515 


23,600,674 



The flax and field-seed business, which is conducted 
largely on the Board of Trade by commission merchants, 
dealers and linseed-oil manufacturers, made wonderful 



366 GOLD BRICKS OF SPECULATION 

strides, receipts of all kinds of seeds increasing from 

7,071,000 pounds in i860 to 690,000,000 pounds in 1890 
and 660,000,000 pounds in 1896. The table below shows 
the steady growth of the seed trade : 

STATEMENT OF FLAX AND FIELD SEED BUSINESS. 

RECEIPTS. 

Flaxseed Bit. Other Seeds Lbs. All Seeds Lbs. 

i860 7,071,074 

1861 7742,614 

1862 8,176,349 

1863 9,885,208 

1864 10,180,781 

1865 14,745,340 

1866 13,618,858 

1867 23,962,397 

1868 25,503,180 

1869 22,803,545 

1870 18,681,148 

1871 20,234,146 

1872 44,755,412 

1873 52,813,468 

1874 73.192773 

1875 75,885,230 

1876 96,890,420 

1877 1^233,485 51,141,672 

1878 1,529,060 48,333,521 

1879 2,129,693 50,509,727 

1880 3427.815 53.972,825 

1881 3'973'983 47.363.084 

1882 4,923,091 52,839,404 

1883 3,079,285 70,704,252 

1884 3-679,530 68,096,691 

1885 6,770,657 68,748,164 

1886 7.092.573 61,577,117 

1887 5.609,457 62,749,766 

1888 4,403,268 75,724,021 

1889 4,501,266 84,599,331 . 

1890 6,642,905 72,086,100 

1891 11,120,138 68,166,231 

1892 9.473.824 53.228,779 



CHICAGO'S GROWTH AS A MARKET 36T 



1893 8,101,992 52,440,522 

1894 5,102,668 47,524,961 

1895 8,525,237 63,868,526 

1896 10,299,525 83,577,243 

1897 4,976,209 79'07i,857 

1898 5481,173 97,039,279 

1899 6,616,626 84,225,909 

1900 4,896,513 64,787,295 

1901 4,584,735 57,625,250 



SHIPMENTS. 

Flaxseed Bit. Other Seeds Lbs. All Seeds Lbs. 

i860 6,055,563 

1861 7,438,485 

1862 6,165,221 

1863 ,.... 7,754,656 

1864 11,782,656 

1865 7,514,928 

1866 13,316,210 

1867 19,058,921 

1868 15,870,950 

1869 12,217,398 

1870 6,287,615 

1871 14,213,989 

1872 22,358,542 

1873 25,761,324 

1874 43,315,623 

1875 55,428,491 

1876 82,344,295 

1877 1,017,207 49,977,020 

1878 980,398 40,538,960 

1879 1,539,372 47-361,744 

1880 2,694,848 44,704,545 

1881 3,510,383 49,610,368 

1882 4,332,047 54,469,994 

1883 3,003,591 62,078,720 

1884 3,033,812 50,001,830 

1885 5,567,526 58,425,811 

1886 6,692,590 60,459,291 

1837 5,262,666 64,540,311 

1888 3,357,370 70,276,346 

1889 3,754,079 84,961,097 



368 



GOLD BRICKS OF SPECULATION 



1890 
1891 
1892 

1893 
1894 
1895 
1896 
1897 
1898 
1899 
1900 
1901 

NOTF..- 



9,990.798 
8,802,220 
7,730,641 

^'353757 
4,726,818 

5'734/>54 
2.859,493 

3'366,739 
3,093,943 
3,266,481 
1,221,097 
Since 1877 flaxseed 



56-poiin(l bushels. 



59,213,036 

55,152,971 

60,670,835 

72,139,009 

66,207,092 

65,567,528 

94,212,310 

87,840,334 

78,764,646 

76,079,526 

68,625,168 

60,287,11 1 

statistics have 1)een compiled in 



In addition to flour, wheat, corn, oats, rye, barley, 
manufactured hog products, flax-seed, timothy seed, clover 
seed, Hungarian seed and millet seed, the dealings on the 
Exchange are extensive in hay, straw, mill feeds, cooper- 
age and beef products. 



FUTURES" . 369 



CliAPll^:R iV. 

"futures." 

Their uses ; Ikjw they prevent speculation ; why and how they are 
settled without delivery ; when delivery is unnecessary ; how 
deliveries are made ; settlements ; settlement and delivery prices ; 
the Clearing-House. 

It is difficult to realize the vast volume of business 
transacted on the Boards of Trade and Produce Exchanges 
of this country. To the layman who hears only of specula- 
lation and manipulation, the Exchanges seem to be founded 
for no other purpose than to provide facilities for specu- 
lation. Speculation is the sensational feature of the trade 
and the newspapers devote the most space to that class of 
news, for the reason that it is sensational. But the re- 
verse is the fact; speculation is a mere incident of the 
grain and cotton trade, and grew up after the Exchanges 
had been established for the purpose of bringing buyers 
and sellers of cash property together at one common point. 

As the volume of cash transactions increased and fa- 
cilities were provided for storage of products at market 
centers, contracting for future delivery developed grad- 
ually. At first these contracts w^re irregular as to quan- 
tity, time of delivery and grade of goods ; but they slowly 
assumed uniformity and the Exchanges, recognizing their 
validity and value, regulated them by rules. It was not 
until early in the 6o's that these " future-delivery " con- 
tracts became general in the grain trade, and the Chicago 
Board of Trade dignified them by adopting rules to govern 
and enforce them. The system gradually developed and 



370 GOLD BRICKS OF SPECULATION 

brought about wonderful changes in the methods of mer- 
chants and millers. 

Prior to the establishment of trading for future 
delivery, as now practiced on the Chicago Board of Trade, 
every grain dealer was a speculator in cash grain, with 
all the uncertainties of the markets to contend with. To- 
day he is a merchant working on an assured margin of 
profit, by reason of his ability to protect himself, by sales 
for future delivery on the Chicago Board of Trade. 
This is illustrated in a simple manner. The grain dealer 

at , Iowa, buys 10,000 l3ushels of ear corn in 

January of the farmers, and stores it in his corn crib. It 
will not be fit to shell and ship until the following May. 
He orders his commission merchant on the Chicago Board 
of Trade to sell 10,000 bushels of corn for May delivery. 
The commission merchant makes the sale and reports back 
the price, etc. The dealer has thus secured his profit, al- 
though it is hve months l:)efore he can deliver the corn in 
Chicago, that length of time being required for the corn 
to cure. Now, the dealer has made what the public call a 
speculative transaction, viz : a trade for future delivery 
on the Chicago Board of Trade, and yet he is the very oppo- 
site of a speculator. Suppose he had not sold the corn for 
May delivery, but had taken all the risk of changes in the 
market for five months, no one would think of calling him 
a speculator, and yet that is exactly what he would be. 

Millers and grain dealers throughout the world trade 
in '' futures " in Chicago, in order to avoid speculating in 
their business, on exactly the same theory as the dealer at 

, Iowa, sells May corn in Chicago against 

the ear corn in the crib at home. If you can find a miller 
with 1,000 or 10,000 barrels of flour on hand that has not 
been sold, you will find that he has wheat '' futures " sold 



''FUTURES" 371 

(usually in Chic^igo) to the extent of about five bushels a 
barrel. As soon as he can sell the flour he will buy back 
the " future." He may sell the flour at 50c a barrel less 
than it cost to grind it, and yet he will not lose a cent. On 
the contrary, he will save his manufacturing profit at loc 
to 25c a barrel, for his sale of the wheat " future " has 
protected him, as wheat and flour prices move together; 
and when he sells his flour at soc a barrel loss, he at tlie 
same time buys back the w^heat " future '' at loc to 12c a 
bushel profit, — the wheat has declined in the same propor- 
tion as the flour. Or, the miller may reverse this operation 
and buy wheat '' futures '' and sell flour, which he has not 
on hand, to be shipped sixty or ninety days hence. He 
either receives the cash w'heat on the " future " when the 
contract matures and grinds it into flour to fill his sale, or 
he buys other wheat better suited to his requirements and 
sells out the " future " as fast as he acquires the necessary 
spot wheat. In the meantime wheat prices may change 25c 
a bushel without disturbing the miller, who, when he pur- 
chased the wheat " future " and sold the flour, had secured 
his margin of profit. Ask any miller why he trades in 
'' futures " and he will tell you it is done to avoid specu- 
lating in his business. 

The grain dealer and exporter who carry stocks of 
grain, or make sales of grain to be shipped in the future, 
are in the same position as the miller. You will find them 
constantly buying and selling " futures " in order to avoid 
speculation in their business. The packer and provision 
merchant resort to contracts for future delivery for the 
same purpose. 

All of these transactions in " futures " made by millers, 
grain dealers and packers are the same as the transactions 
ordinarily known as " speculative transactions," and at the 



372 GOLD BRICKS OF SPECULATION 

time they are made and in the manner of their execution 
and settlement they are in every way identical. If a specu- 
lator desires to buy 5,000 bushels of wheat for May de- 
livery, he buys it at the same place and in the same manner 
as does the miller who wants the wheat to grind. Both 
transactions are subject to the same rules and customs. 
Both parties must be prepared to receive and pay for the 
property at the maturity of the contract; and, in the eyes 
of the law, the contract of the speculator is as legitimate as 
that of the miller. 

The trading in '* futures '' has been criticised by those 
ignorant of its great aid to agriculture and commerce from 
the day when the increase of yield of farm products in 
the West and South made it necessary to buy and sell for 
delivery at a future time in order to facilitate the carrying 
and distributing of the farmers'" surplus crops at a mini- 
mum of cost and risk for the months intervening between 
harvests. 

Intelligent and broad-minded persons have always 
recognized the utility of the contracts for future delivery. 
Fifteen years ago, when the question w^as generally dis- 
cussed, several newspapers saw fit to comment on it and I 
print below their editorials : 

To the initiated the contract for future delivery is as legitimate 
a business transaction as an act of primitive barter. — Minneapolis 
Tribune, November 24, rSS/. 

That the great mass of business done on exchanges is speculative 
trading cannot be questioned, and the number of good business 
men is not few who are unable to see any difference between this 
and the gambling of the bucketshop. There can be nothing gained 
by quarrehng with ignorance, but we cannot forbear expressing 
astonishment at times at the density of prejudice that has been en- 
gendered from this cause against speculation. — Oil City Derrick, 
November, 1887. 

The ignorance of ministers, newspaper writers and political 



"FUTURES" 373 

demagogues who make it a business to attack this supposititious evil 
(deahng in " futures " in wheat), however, is less damaging to the 
world's gram trade than the partial knowledge of the average busi- 
ness man of the practical operation of this method in the distribu- 
tion of the world's produce. — Chicago Infer Ocean, November 6, 
1887. 

The following- is an article published in 1899, giving 
the views of a Canadian on the benefits of '' futures ": 

" FUTURES." 

In order to facilitate business, dealings in " futures," that is, 
grain for future delivery, are , permitted on all the leading ex- 
changes of both continents. It would be impossible to handle the 
grain for immediate delivery. Future contracts must be entered 
into. The establishment of markets for future nionths was simply 
satisfying an existing want. There is an underlying principle that 
cannot be lost sight of. All the conditions that may arise to affect 
supply and demand in the near future have to be weighed and esti- 
mated. Grain has a prospective as well as a present value. This 
speculative element, therefore, is only an incident of business, but a 
necessary incident. All eyes the w-orld over are turned towards the 
Chicago Wheat Market. It is not too much to say that for eleven 
months out of every twelve, Chicago regulates the prices of bread- 
stuffs for the universe. In spite of this, however, the great Ex- 
change is regarded w^ith suspicion in many quarters. Occasionally 
a reckless dealer will stake his last dollar on the turn of the market, 
attempting to realize maximum profits from minimum investment, 
and comes to grief. His downfall is heralded far and wide, and 
offered as a terrible example of the evils attending Board of Trade 
transactions. The fault lies with the dealer in such cases. He does 
not exercise the same care and judgment that he w^ould use in his 
ordinary business. He " plunges," and meets the fate that sooner 
or later always overtakes the reckless. A part of the caution, judg- 
ment and risk necessary in any line of trade, applied to legitimate 
speculation in grain futures, brings most substantial results. It is 
the ill-informed, the careless or the over-greedy man who suffers 
in speculation. 

As to trading in grain futures we have all heard of the losses in- 
curred by holders of grain when the market drops. As a modest 
example, take the case of the buyer at a country station. Say he 
has 10,000 bushels on hand. A drop of loc means a straight loss 



3Ti GOLD BRICKS OF SPECULATION 

to him of $i,ooo. He cannot perhaps get a bid on his wheat until 
the market has gone down to that extent. On a falhng market 
wheat at the seaboard or on ocean passage will sell because it can be 
delivered \\ithin a reasonable time. But the man with 10,000 or 
20,000 bushels back at some country point must needs hold his 
wheat and watch his loss nuiltiplying day after day. Now this is 
easily aA^oided by selling on the Chicago market a future option, the 
same quantity as he holds of cash grain at home. He will still lose 
on his cash holdings, but this loss w^ill be offset by the profit on his 
Chicago short sale. The country buyers throughout the North- 
western States protect themselves every day in this manner. It is 
the only way they can be insured against loss should the market 
turn against them. In Canada, too, the larger dealers adopt this 
plan, and it is coming more and more into use among the average 
Canadian dealers. 

Then, too, millers who often must buy quantities of wheat at cer- 
tain seasons whether they want it at the time or not, or lose their 
chance of getting it to good advantage when they do want it, may 
sell a future in Chicago and provide against loss by a falling market 
should it set in before they have manufactured and disposed of their 
flour. But it is not a falling market alone that the grain dealer or 
miller has to fear. Often, in the course of a season he is hit just 
as hard by an advancing market. Men in this business for different 
reasons, frequently make sales of grain or flour for delivery later on, 
without having the necssary stocks on hand at the time. The price 
they sell at may look temptingly high, and to their minds they will 
be able to buy in the grain to cover their sales at a low enough 
price to make a handsome profit. lUit the condition may undergo a 
change verv suddenly, and instead of wdieat going down, it may 
go up. Then they would have to fill their sales at a loss, small or 
great, according to how far the market had advanced before they 
bought. In this case, too, they may avoid loss, by simi)ly buying a 
future in Cliicago at the time they sell at home. 

This is done the year around, and without such a means of 
" hedging " trade would be hampered to such an extent that nobody 
would risk his money in bu} ing up large quantities of grain here 
and there all over the continent not knowing at the time when or 
where it would be marketed. So that trading in futures is not 
gambling. It is an important and essential part of the prevailing" 
and only possible system of handling successfully the grain crops of 
the world season after season. The foregoing are merely examples 



"FUTURES" 375 

of the application of fnlures in their relation to the grain trade 
proper. What is tluis clone in a small way is done all along the 
line of traders until the largest European grairi houses are reached. 

To go outside the grain trade, and instance the case of the man 
who, having money to invest in something that may make him larger 
and quicker returns than hank stocks and such investments, why 
should anyone say to him he is gambling if he buys May wheat on 
margins in Chicago? If he buys bank stock, nine times out of ten 
he does not pay for it outright, merel} putting up a part of the price 
with his broker — in other words, a margin. And his motive is the 
same in each case, merely the desire to make money. But, some 
will say, there is no such a commodity as May wheat. Well, there 
is; and just as sure as you buy it and do not sell it before May you 
wuU be tendered the actual wheat on the last day or whatever other 
day, during May, the seller is disposed to deliver it to you. If you 
do not want the actual wheat you can settle with the seller on the 
basis of price of Ma}' wheat the day he tenders delivery to you, or 
he can re-sell it for your account.''' There is no dead stock in fu- 
tures. There is always a market for them. The intrinsic value of 
the wdieat itself guarantees that. 

As a practical and familiar example of the reality of Chicago 
futures, take the case of the United States quotations for corn com- 
ing into Canada, which is such an extensive trade at present. The 
price of May- corn is taken as the basis of calculations. A fixed 
arbitrary is added to the price of this option to arrive at the price of 
cash corn delivered, say, at Toronto or Montreal. If May corn 
goes dowm a cent, American corn for delivery here drops a cent. 
If it goes up a cent, Toronto price follows : it not only follows even- 
cent differences, but i/g-cent differences. Here we have an at- 
home illustration of the influence of the future market on the actual 
cash grain into Canada. 



Why and How '' Futures '' are Settled Without 

Delivery. 

The strongest weapon in the hands of those opposed to 
■' futures " has been the argument that every purchase and 



* Note. — -This statement is not accurate ; it should read : " If you do 
not want the actual wheat, you can sell it at the current market, on or before 
the day it is tendered to you." The only way to dispose of a contract of 
purchase is to make a corresponding contract of sale and deliver the wheat 
to the party to whom you have it sold when it is delivered to you. 



370 GOLD BRICKS OF SPECULATION 

sale for future delivery is not finally consummated or set- 
tled by the actual deli^'ery of the property on the contract 
at maturity. I ha^'e never seen a lucid explanation in an- 
swer to this argument and I recognize the difficulty of 
demonstrating to the average reader the reason why a 
contract made in January, say, for .May wheat, between 
Smith and Brown can be finally settled months l)efore the 
maturity of the contract, and without the actual delivery 
of the wheat. 

In attempting to make this point clear, I purpose to 
avoid all reference to rules and regulations of the Ex- 
changes, as I believe they might tend to confuse the ordi- 
nary intellect ; but I shall explain how the result is reached 
on the Chicago Board of Trade, under and in accordance 
with its rules and in an absolutely legal manner, approved 
by the courts in a long line of decisions. 

All contracts for future delivery on the Board are made 
in the same manner and are exactly similar as to quantity, 
or unit. Except in wheat and flaxseed, where there is a 
small volume of trade in i ,000-btishel lots, the unit is 5,000 
btishels. Thus if broker " A " btiys from broker " B " 
25,000 bushels of wheat for Alay delivery, he has really 
bought five 5,000-btisli^l lots, and both parties would so 
enter the transaction on their books. Delivery must be 
made in lots of 5,000 bushels and settlement can ])e ef- 
fected for 5,000-bushel or any number of 5,000-bushel lots 
up to the total amount of the contract. The same holds 
true in all transactions. When a trade of 100,000 bushels 
is reported, it means twenty lots of 5,000 bushels each; of 
a million btishels, two hundred lots of 5,000 bushels each. 
A broker may receive orders from fixe clients at the same 
time to btty May wheat. Clients " A," " B " and '* C " 
order 10,000 bushels each; client " D,'' 15,000 bushels, and 



•: FUTURES " 377 

client " 1^ " 5,000 bushels, ag-gregating- 50,000 bushels. 
The broker steps into the wheat pit and bids for 50,000 
bushels. Inlying it all of one party. Fie then divides the 
purchase among his clients; "A," "B" and "C " each 
get two 5,000-bushel lots; "D" gets three 5,000-bushel 
lots and " E " one 5,000-bushel lot. The party of whom 
the broker bought has really sold him ten 5,000-bushel lots, 
and so enters it on his books ; although at the time the 
trade was made it was spoken of as a 50,000-bushel trade. 
This is a feature of the trading which must be clearly 
understood by the reader before he can grasp the system 
of settlements. 

All contracts being uniform as to quantity, they are 
substituted one for the other, and members of the Board, 
acting as commission merchants, do not try to preserve 
the identity of the contracts made for any particular cli- 
ents. In lieu of doing so, and for the privilege of substi- 
tuting similar contracts, they guarantee to their clients 
the fulfillment of the contracts, a course not usually adopted 
by agents when acting for principals. The right to substi- 
tute contracts is the consideration for the guarantee. 

We will now take five imaginary commission mer- 
chants; Brown, Jones, Smith, Day and Lee. They all 
receive and execute orders for the purchase and sale of 
grain for future delivery, on the Board of Trade. Their 
clients are millers, exporters, eastern dealers, buyers of 
grain at western points, speculators and investors. The 
clients send orders from day to day as their business 
requirements or desire to speculate may dictate. Some 
of these orders are to buy, some to sell. We shall assume 
that they are all in wheat for May delivery and that the 
contracts are entered into in January. 

Brown receives an order to buy 5,000 l:)ushels of May 



378 GOLD BRICKS OP SPECULATION 

wheat. Stepping" into the wheat market, or " pit," he huys 
the quantity ordered of Jones, one of the other commission 
merchants. If either Brown or Jones elects, there is but 
one way to settle this contract, — that is, by actual delivery 
of the wheat by Jones to Brown some time in tlie month 
of May. Or, if Brown does not sell 5,000 bushels of May 
wheat and Jones does not buy 5,000 bushels of May wheajt, 
settlement would be impossible, except by Jones procuring 
the actual wheat and delivering it to Brown in the month 
of May. In other words, both parties to the contracts must 
first have a purchase and a sale of May wheat, and, sec- 
ondly must consent to a settlement before any contracts 
can be closed except l)y delivery. 

But there is a third and more essential condition which 
must exist l)efore the first two are of consec|uence, and 
they are not sought nor considered until it is discovered 
that this third condition exists. It is the all important 
reason for settlements without delivery and is the mere 
fact that delivery would he idle and uuneeessary. There- 
fore only such contracts for future delivery are settled 
without delivery of the actual grain, as the parties to tlic 
contracts may agree to settle after having discovered that 
delivery would be an idle form. 

AA'hen Delivkrv is Unnecessary. 

When a purchase and sale (there must be both a buyer 
and seller) for future delivery is made on the Chicago 
Board of Trade, it must be made with the intention on 
the part of the purchaser to receive and on the part of the 
seller to deliver the commodity, although subsequent events 
may render delivery unnecessary and settlement before 
the maturity of the contract desirable, without jeopardiz- 
ing: the les^alitv of the contract. But this cannot be fore- 



" FUTURES " 379 

seen, and the buyer and seller must calculate to be pre- 
pared to receive and deliver the cash commodity at ma- 
turity of the contract. 

Brown having bought in January 5,000 l3ushels of May 
wheat of Jones, as previously stated, enters the transaction 
on his ])ooks, and in the usual course of business Jones 
would deliver him the actual wheat some time in the month 
of Alay. But a week later Brown receives an order to 
sell 5,000 Inishels of May wheat, and stepping into the 
wheat pit offers the grain for sale, and Jones buys it from 
him. Now we have Brown and Jones in the position of 
having both bought of and sokl to each other 5,000 bushels 
of May wheat. Brown, who originally bought of Jones, 
has now sold to Jones, and Jones, who originally sold to 
Brown, has now bought of Brown. Suppose it were illegal 
to settle future contracts, except by the delivery of the 
actual grain, where would Brown and Jones be? Which 
one would make the initial delivery of the grain? Each 
would say to the other when May arrived, " Deliver me 
that 5,000 bushels of wheat I have bought of you, so that 
I can deliver it back to you and thus settle your sale to and 
purchase from me, and my sale to and purchase from you,'' 
and each would answer the other, " When you deliver me 
the wheat you have sold me, I will deliver it to you." 

Could a more absurd condition exist in business ? Yet 
this is exactly the kind of a transaction that gives rise to 
the criticism that " futures " are settled without delivery. 

Brown and Jones have no trouble settling these con- 
tracts. If Jones sold the w^heat to Brow^n at 80c a bushel 
and subsequently bought it of him at 81 c a bushel, he has 
a loss in the transaction of ic a bushel, or $50, w^hich he 
pays to Brown immediately, and the contracts involved 
are settled. It is the same course that would be followed 



380 GOLD BRICKS OF SPECULATIOX 

in any business in any other part of the civihzed world 
withottt exciting- comment, to say nothing of criticism. 

I have shown yon the trade and settlement between 
Brown and Jones to demonstrate how unnecessary and 
idle it would be to deliver on these contracts, and to illus- 
trate the most simple and direct settlements that can occur. 
It is my purpose now to take the reader one step further 
into the more complicated settlement, which, although 
exactly similar in principle, involves more than two brok- 
ers and seems to get beyond the range of the ordinary intel- 
lect, either to master or to explain, and yet it is almost as 
simple as the settlement involving but two brokers. 

In the month of January, Brown l)uys of Jones 5,000 
bushels of Alay wheat ; on the following day Jones buys 
5,000 bushels of May wheat of Smith. The purpose of 
these transactions is that in the month of May, Smith 
will deliver 5,000 bushels of wheat to Jones, who in turn 
will deliver it to Brown, thus fulfilling the contracts. But 
if in the course of business extending over the period be- 
tween January (when the contracts above mentioned were 
made) and May (when the contracts mature) it shotild so 
happen that Smith should buy 5,000 bushels of May wheat 
from Brown, the three brokers would be in the same posi- 
tion that Brown and Jones were in on the first transaction 
referred to, where each had the wheat bought and sold 
to the other. To make this more clear : 

Brown has bought of Jones. 

Jones has bought of Smith. 

Smith has bought of Brown. 
Putting it another way : 

Brown has sold to Smith. 

Smith has sold to Jones. 

lones has sold to Brown. 



''FUTURES" 381 

It will be noticed that no matter how you put these 
transactions, they begin and end with the same party, and 
it would be the same in case any of the brokers delivered 
the wheat, for it would come back to him who delivered it, 
after passing through the hands of the other two. Assum- 
ing, for example, that Smith delivered the 5,000 bushels of 
v^^heat, it would pass from one to another, as follows : 
Smith delivered to Jones. 
Jones delivered to Brown. 
Brown delivered to Smith. 

So that Smith would get the wheat back, and the 
delivery w^ould have accomplished only the settlement of 
the contracts as among the three parties. If each of the 
three parties received and paid for the wheat and in turn 
delivered it out and received a check for it, as they w^ould 
have to do in this case, and assuming the average price 
of the contracts to be 80c, each party would collect and 
pay out $4,000; in other words, handle $8,000. So that 
the aggregate received and paid out would be $24,000 to 
settle these three transactions in which the difference 
might be a very small sum. But the delivery spoken of 
would not occur for the simple reason that Smith would 
wait for Brown to deliver the wheat to him, so that he 
(Smith) could deliver it to Jones, while Brown w^ould 
wait for Jones to deliver the wheat to him, so that he 
(Brown) could deliver it to Smith. 

It will be seen that delivery on these contracts is not 
only unnecessary but also impossible , except by borrowing 
the cash wheat for the purpose of going through an idle 
form. 

Before showing how these trades are finally settled, I 
desire to carry the illustration a little further. 

The case of Brown, Jones and vSmith can be extended 



382 GOLD BRICKS OF SPECULATION 

SO as to involve a large number of brokers. It is frequently 
discovered that as many as twenty brokers are in the same 
position on one transaction, as Brown, Jones and Smith 
were, that is, they uiust settle without actual delivery, as 
every one of them has it bought and sold and each is wait- 
ing for the party he has it bought from to deliver it to 
him. If they should fail to investigate and discover the 
true state of the trades, every one of the twenty brokers 
would default on his contract by reason of their all waiting 
for an impossible or at least improbable delivery. 

To escape the possibility of l^iecoming involved in trades 
that would result in default, to facilitate their business by 
discovering and settling these unnecessary contracts, and 
to collect and pay all differences on these closed contracts, 
every broker in Chicago who trades in futures employs 
a clerk whose duty it is to watch the transactions closely 
and see that they are settled immediately, in case it develops 
that delivery on the contract is unnecessary for the reasons 
just described. 

Every trade for future delivery made on the Chicago 
Board of Trade (unless the seller defaults on the contract, 
and defaults are very rare) is finally settled by the delivery 
of the commodity contracted for, except such trades as get 
into a position that renders delivery unnecessary, as in the 
cases already set forth. This manner of settling trades is 
the basis for the claim that the transactions on Exchanges 
border closely on gambling, if they are not actually gam- 
bling. But no court has ever held that an idle, expensive 
and unnecessary delivery of goods or property was neces^ 
sary to secure the validity of a contract. 

Suppose a real-estate speculator, seeing what he 
thought was a chance to make a i)rofitable deal on a corner 
lot, should purchase the property to-day, contracting for 



"FUTURES" 383 



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WAREHOUSE RECEIPT, 5,O0O BUSHELS STANDARD OATS. THESE RECEIPTS ARE 
NEGOTIABLE. RECEIPTS FOR WHEAT, CORN AND RYE ARE ISSUED IN SIM- 
ILAR FORM, THEY ARE REGULAR FOR DELIVERY ON ALL CONTRACTS. 

the delivery of the deed to him within sixty days. A week 
after he meets the party from whom he ptir chased the lot 
(who has, in the meantime, repented of selling), the specu- 
lator sells the lot back to the original owner at an advance 
of $1,000. AVould it be necessary for the original owner 
to deed the lot to the speculator and the speculator deed it 
1)ack to the original owner in order to take the transaction 
out of the category of gambling transactions? No criti- 
cism would be made if the speculator were simply paid his 
profit, the difference between the purchase and the sale 
price. This is a case parallel to the first transaction in 
wheat between Brown and Jones. 

But suppose the real-estate speculator sold the land at 
$500 advance to another speculator, who in turn sold it to 
a third speculator at $i,ooo advance, and before the orig- 
inal owner had the papers drawn up, he (repenting having 
sold) seeks out the third speculator and by offering him 
$500 advance buys back the lot. Alust a deed pass to and 
from each of the four parties to the transaction in order to 
make it other than gambling? 



384 GOLD BRICKS OF SPECULATION 

It would be conceded on all sides that the only acts 
necessary to settle these transactions would be the pay- 
ment by the owner of the land of the differences to the 
various purchasers and the retention of the title to the 
property, delivery of the land to each purchaser being un- 
necessary. 

AA^ould a land deal of this kind be a ^-ambling transac- 
tion ? 

No ])erson of intellio-ence has ever had the hardihood to 
assert that such a deal would be other than legitimate, and 
yet it differs only in character of j^roperty dealt in from a 
transaction on the Board of Trade, and the method of set- 
tlement is the same. In both cases delivery is not neces- 
sary in order to legalize the transactions, and both are set- 
tled by the payment of the difference between the contract 
prices. 

The argument will be advanced, however, that in the 
the case of the real-estate transaction the first seller had the 
actual property on hand when he sold it, while Jones sold 
wheat to Brown which he did not have. Jones may or may 
not have had the w^heat on hand when he sold to P^rown, 
but he afterwards accjuired it by purchase from Smith. 
and he knew at the time of his sale to Brown that he could 
go into the market and make such a purchase. The fact 
that he afterwards bought the wheat from Smith is no 
evidence that he did not have it on hand at the time of his 
original sale to Brown. He might, like the real-estate 
owner, desire to keep the property and, instead of deliver- 
ing it, buy 5,000 bushels May wheat from Smith wath the 
result heretofore described. Or, having the cash wheat 
on hand at the time of the original sale of May w^heat, he 
might have taken advantage of market conditions and sold 



"FUTURES" 3b5 

his cash wheat and l^oughl the 5,000 Inishels of May wheat 
from Smith to fulfill his sale to Brown. 

Whether or not Jones intended to acquire the wheat 
by subsequent jiurchase, or had it on hand at the time of 
the sale to Brown, does not affect the legality of the sale, 
or make it any less a legitimate transaction than the sale 
of the real estate. Both the grain and the real-estate con- 
tracts can 1)e enforced by law, which is the proof of their 
legality. 

Having shown you " when delivery is unnecessary " 
and settlements are effected by the payment of the diifer- 
ences between the contract prices, I shall now give a short 
explanation of how deliveries are made ; for on all contracts 
for future delivery fJierc is an actual delivery (defaults, 
which are rare, excepted) unless it develops that delivery 
is unnecessary. 

How Deliveries Are Made. 

Deliveries, on contracts for future delivery of grain, 
flax-seed and provisions entered into on the Chicago Board 
of Trade, are made by warehouse receipts for the com- 
modities in warehouses declared " regular " by the Board. 
Deliveries of grain and flax-seed are made in lots of 5,000 
bushels (except a few in w^ieat and flax in 1,000-bushel 
lots), provisions in lots of 250 packages and 50,000 pounds. 

All contracts upon which delivery is unnecessary are 
eliminated as fast as they are discovered, so that when 
the month of delivery arrives it finds only the contracts 
open upon which delivery must be made. Sellers begin to 
deliver the commodities on the first business day of the 
month at 8:30 A. M., and frequently deliveries are very 
liberal throughout the month. 

Warehouse receipts deliverable on the contracts are 



386 GOLD BRICKS OF SPECULATION 

negotiable, and great care is necessary to prevent their loss. 
If it were not for the manner in which the deliveries are 
made, the parties to the contracts would be subjected to 
great loss and annoyance by reason of lost or misplaced 
warehouse receipts and unnecessary clerical expense. 

Experience and necessity have developed an almost 
perfect system of delivery, which eliminates all danger of 
loss of warehouse receipts and simplifies the work. 

At 8:30 K. M. on the first business day of each month 
deliveries are made by notice in the Exchange hall of the 
Board of Trade. Every party having grain, i)rovisions or 
flax-seed contracts open for that month must be repre- 
sented. Those traders having commodities to deliver hold 
the receipts in their offices, but hand notices to the parties 
to whom they have made sales, notifying them to call and 
pay for the property and get the warehouse receipts. The 
party receiving the notice either holds the notice and sends 
a certified check to the party making the deliver}', who 
then turns over the warehouse receipts to him, or, if he 
has a contract of sale with some other member, he passes 
the notice b\' endorsement to the third part}', who can in 
turn do the same thing. So that a notice of delivery may 
go through twenty-five or thirt}' hands, until it finally 
reaches a party who for some reason desires possession of 
the commodity. 1liis last party thereupon pays for it and 
all the intermediate parties settle by receiving or paying 
the dififerences between the contract prices — in other 
words, the profits or losses in the trades. 

This system of deliver}- saves the paying out and col- 
lecting by each part}' of the full xalue of the commodity 
delivered, as well as the passing of the warehouse receipt 
from office to office. Thus deliveries that would involve 
immense sums of monev and two or three davs' time are 



"FUTURES" 387 



Harris .Gates & Co. 



Chicago, September 16,1903. 



Mr. John Hill, Jr., 

Chicago. 
Dear Sir:- 

In reply to your Inquiry in regard to the volume of 
deliveries of cash grain and provisions on future delivery contracts, we 
beg to state that. In our opinion, the public have but a slight con- 
ception of the enonnous quantity of commodities that are delivered on 
contracts of this character by members of the Board of Trade, 

In transactions for future deliveries made by this house, 
there Is constantly being received, paid for and delivered out large 
quantities of both grain and provisions. 

As an Illustration, during the first day of July, 1902, we 
received and paid for -2,319,478 bushels and 10 lbs. of corn, and during 
the month of July there was a total of ten million bushels of corn 
delivered to us, and all of this corn was in turn shipped by us within 
thirty days and distributed throughout the eastern and New England 
States. 

In addition to this we paid for large quantities of i*ieat and 
provisions. 

Yours truly, 

HAERIS, GATES & CO. 

A PHASE OF THE BUSINESS THAT THE PUBLIC FAILS TO COMPREHEND. 



388 GOLD BRICKS OF SPECULATION 

consummated in forty-five minutes and by paying for the 
property once. After the first dehvery day dehveries can 
be made by warehouse receipts from oliice to office each 
morning, but in the afternoon of each business day, dehv- 
eries are made by notice in the Exchange hall the same as 
on the morning of the first business day of the month. 
The delivery notice is a complete description of the receipts 
and the contract on which they are to be delivered. Any 
person to whom the notice is delivered can procure the re- 
ceipts by holding the notice and sending a check for the 
value of the commodity to the party issuing the notice. 
Every notice is back to the office of the issuer within an 
hour after deliveries close, accompanied by a certified 
check, and the warehouse receipts are surrendered to the 
party thus paying for them. 

The volume of these deliveries is at times beyond com- 
prehension. I had occasion to investigate one lot of 
1,200,000 bushels of wheat, sent out by a firm on notices, 
on the morning of May ist, several years ago. 1 found 
that the 240 notices of 5,000 bushels each had passed 
through an average of twenty hands ])efore they finally 
lodged and were paid for. Thus contracts for 24,000,000 
bushels of wheat were settled by delivery of this lot of 
wheat in forty-five minutes (the delivery runs from 8:30 
to9:i5A. M.y 

As there were between five and ten million bushels of 
grain delivered that morning, the contracts settled by 
delivery were evidently between one hundred and two hun- 
dred million bushels. If that volume of business should 
be carried on from office to office, it would have involved 
much time, labor, expense and delay, all unnecessary, 
except to satisfy a few '' croakers,'' who contend that by 
reason of the failure of each party receiving the delivery 



'• FUTURES" 389 

notice to pay for the coniiiiodit\', there was no dehvery. 
Vet every person recei\'ing the notice had aljsokite control 
of the disposition of the warehouse receipts during the time 
the notice w^as in his hands ; for it passes from hand to 
hand and can be stopped by any party who receives it. 

Settlements, and Settlement and Delivery Prices. 

Contracts settled for the reason that delivery is un- 
necessary must l)e uniform in all respects. If only two 
parties are involved the settlement is very simple; the one 
having a loss in the transaction pays it to the other, who 
has a profit. But when more than two parties are involved 
the collecting of profits and payment of losses are more 
complicated and difiicult of explanation, although dififering 
not the least in principle. The parties having losses pay 
and the parties having profits collect them, and in every 
settlement, \\'hether it involves two or twenty parties, the 
losses equal the profits. 

To illustrate this I shall use an imaginary settlement 
involvino- five brokers. The settlement is of S,ooo bushels 
of May wheat and might occur any time after trading in 
that " future '' becomes general. 

Brown has sold to Jones at 8ic. 

Jones has sold to Smith at 79c. 

Smith has sold to Day at 82c. 

Day has sold to Lee at 78c. 

Lee has sold to Brown at 83c. '•' 
A little figuring shows that Jones, Day and Brown have 
respectively 2C, 4c and 2c a bushel loss — aggregating 8c 
a bushel — in their transactions ; w^hile Smith and Lee each 



* Note. — It will be noticed that if ariy of these parties delivered the wheat 
on his sale at maturity,, he would receive it back from the party from whom 
he has it bousht. 



390 GOLD BRICKS OF SPECULATION 

have a profit — Smith of 3c and Lee of 5c a bushel, a total 
of 8c a bushel, equal to $400 on 5,000 bushels. When it 
is discovered that the trades are in the position indicated 
and delivery is unnecessary, and all the parties agree to 
settle tJie transactions, the next step is to transfer the $400 
owed by Jones, Day and Brown to Smith and Lee. 

An extremely simple method of doing this has been in 
vogue for twenty years. Each day a " settlement '' price, 
or, more properly, a figuring price, is fixed. It has nothing 
to do with the real settlement of the contracts, being a mere 
convenience, as I shall show. In settling this 5,000 bushels 
May wheat as among the five brokers, the settlement or 
figuring price for the day on which the settlement is made 
will be used as a figuring basis. Taking 80 cents as the 
settlement price, we get the following result : 

SETTLEMENT 5,000 BUSHELS MAY WHEAT 
Settlement Price, 80c 

SALES. LOSS. PROFIT. 

Brown 

to Tones at 8ic Jones 2c per bushel 

to Smith at 79c Smith 3c per bushel 

to Day at 82c Day 4c per bushel 

to Lee at 78c Lee 5c per bushel 

to Brown at 83c Brown 2c per bushel 

Total 8c per bushel 8c per bushel 

$400 $400 

You will notice that in the case of Day, who has a 
loss of 4c a bushel ($200) to pay, he has the wheat bought 
of Smith, who has a profit of 3c a bushel ($150) to collect; 
and he (Day) has it sold to Lee, who has a profit of 5c 
a bushel ($250) to collect; and the question would arise 
immediately as to which of these parties Day should pay 
his $200 loss to, if it were not for the figuring price. Day's 
clerk figures that having bought the wheat of Smith at 82c 



'•FUTURES" 391 

and sold it to Lee at 78c, he must settle on a basis of 80c 
with each, whicli he does by paying Smith down to 80c, 
which would be 2c a bushel ($100), and paying Lee up 
to 80c, or 2c a bushel ($100). Thus Day has paid his loss 
direct to the parties with whom he had the trades. All the 
other parties to the contracts pay and collect to this com- 
mon price, so that each pays his whole loss, or collects his 
whole profit in a systematic and simple manner. 

Jones, who has bought of Brown at 8ic and sold to 
Smith at 79c, pays each to 80c, ic a bushel, or $50 in l)oth 
instances. 

Brown, who has sold at 8ic to Jones and bought at 83c 
of Lee, pays Lee 3c a bushel ($150) and collects ic ($50) 
of Jones. 

So that each party settles with the parties with whom 
he originally made the transactions, on the basis of an 
imaginary figure, which might just as well be 50c a bushel 
away from the actual market so far as results are con- 
cerned, but which is every day fixed at about the average 
price of the day. 

The using of the '' settlement '" or figuring price has 
the effect of enabling each party to the settlement to settle 
direct with the two parties with whom he has made the 
transactions, on the same basis that he would settle with 
them in case of a settlement wherein only two parties were 
involved. It simply reduces the transactions to the same 
basis as a trade wherein the purchaser had sold back to the 
seller at the settlement price and the seller had bought 
back of the purchaser at the settlement price. In other 
words, it works out the same as if Jones, who had it bought 
of Brown at 8ic, sold it back to him at 80c and paid his 
loss of IC a bushel ($50) to Brown, and then having it 
sold to Smith at 79c, bought it back of him (Smith) at 80c, 



392 GOLD BRICKS OF SPECULATION 

another loss to Jones of ic a bushel ($50), which he pays 
to Smith, and so through the whole list of persons inter- 
ested in the settlement, as follows : 

Brown sold to Tones at 8ic \ ,^ 

Jones sold to Brown at 80c ( l^^-own collects ic of Jones 

Jones sold to Smith at ygc ) ^ . , 

Smith sold to Jones at 80c \ ^'^''^' ^^^^^^^^' ^^ °^ J^^^"' 

Smith sold to Dav at 82c ) ^ . , „ ^ ^ 

Day sold to Smith at 8oc I ^"""^ '^""^'^''^ ^^ °^ ^^^ 

Dav sold to Lee at 78c ) ^ ,, ^ ^ i^ 

T ■ 1 1 ^ TA ^ o - Lee collects 2c of Dav 
Lee sold to Day at 80c ) 

Lee sold to Brown at 83c ) ^ .. ^ , ,, 

^ 1 1 . T ^ o ■ Lee collects 3c of Brown 

Brown sold to Lee at 80c ) ^ 

Loss. 

So that Brown, whose loss is 2c a bushel, has paid Lee 3c and 

collected of Jones i c Net 2c 

Jones, whose loss is 2c a bushel pays ic to Brown and ic to 

Smith Net 2c 

Day, whose loss is 4c, pays 2c to Smith and 2c to Lee Net 4c 

Total 8c per bushel 

It will be noticed that Smith and Lee have collected 
respectively 3 cents a bushel {$150) and 5 cents a bushel 
($250) direct from the ])arties with whom they had the 
trades, although in no case is the loss of any one of the 
debtors the same as the profit of either Smith or Lee. In 
every case in which a settlement is made in lieu of an un- 
necessary delivery — and no settlements can be made except 
on that basis — the result will always be the same, the losses 
equalizing the gains. 

Delivery Price. 

Deliveries on contracts when the warehouse receipts are 
passed from ofiice to office are paid for at the price of the 
contract as originally made between the brokers. A^'hen 
delivery is efifected by the " delivery " notice, as explained 



" FUTURES " 393 

heretofore, it is made at a " delivery " price fixed each 
day, as in the case of the settlement price, and the com- 
modity is figured, for the purpose of delivery, at that price. 
The party receiving the commodity pays for it, not at the 
price he had it bought at but at the delivery price. If the 
delivery price is less than the price of the contract on which 
he received it, he pays the difference to the party from 
whom he had it bought, but if it — the delivery price — is 
in excess of the purchase price he collects the excess or 
difference from the party from whom he has it bought. 
This plan is followed by each party who received and de- 
livered out the "delivery" notice; they use the delivery 
price as a figuring price and pay the differences in exactly 
the same manner as they would w^hen using the settlement 
price, in case of settlement without delivery. 

Even the party sending out the notice receives payment 
at the delivery price, and he collects of or pays to the 
person to whom his sale was made and who first received 
the delivery notice from him, the difference between the 
contract price and the delivery price. The " delivery " 
notice may be passed through any number of brokers and 
the contracts settled at the delivery price. The following 
morning the brokers pay and collect the differences between 
the price at which they originally made the purchase and 
sale and the delivery price. 

The '' delivery " price is like the " settlement " price, 
a mere figuring basis for the convenience of the traders. 
Neither has the slightest relation to the real transaction. 
or its settlement or delivery ; but after settlement is agreed 
to, or delivery made, they furnish a simple, systematic, 
economic and uniform basis for the payment of balances 
due to or payable by the brokers, without changing the 
result one iota. If there were neither '' settlement " nor 



394 GOLD BRICKS OF SPECULATION 

" delivery " prices fixed, the business would be handled 
exactly the same as it now is, with the exception that the 
payments of balances wottld have to be made in a cumber- 
some and tmsatisfactory manner. 

The Clear TNG- House. 

Banks in the larger cities, in order to facilitate the 
collecting of checks drawn on other l^anks and deposited 
wath them and the payment of checks drawn on them and 
deposited with other l^anks, have established clearing- 
houses into which each bank pays or from which it col- 
lects the net difference between the checks held 1)y other 
banks drawn against it, and the checks held bv it drawn 
against all the other l)anks, which are members of the 
same clearing house. 

The sum of the debit balances ecjuals the sum of the 
credit balances each day in the clearing-house. \\'ith the 
aid of the clearing-hotise each bank's clerks quickly adjust 
their bank's accounts with all the other banks, l)y the re- 
ceipt or payment of the net difference l)etween its claims 
against other banks and the other banks' claims against it. 
Thus a bank finds that it holds $1,000,000 in checks drawn 
against other banks who are members of the clearing- 
house. At a stated time each morning a clerk of the bank 
goes to the clearing-house and presents the claim of 
$1,000,000. The other banks at the same time present 
their claims, and it is discovered that the combined claims 
of all the other banks against the bank presenting the 
$1,000,000 claim is $999,999. This leaves a balance of 
$1 due the liank on its claim of $1,000,000. It collects $1 
from the clearing-hotise, and thereby adjusts almost 
$2,000,000 of claims and counter-claims. In this way 
fifteen or twenty banks in a large city can in a very few 



"FUTURES 



395 



/^: 



t^.This nottee is deliverable on contracts in the exchange Hall, Only between the hours of 1:30 and 2:00 o'cloth P. M. 
exctptJng on the first hutinesi day of each month, on which day also between the hours of 8:30 and 9:1a o'clock A. M., and the 
property must be called and paid for at the office of its issuer before 2:45 o'clock P. M. and 1 1.00 o'clock A. IK. 




DELIVERY NOTICE. 




We hay^ on hand ready for delivery the following described Warehouse Receipts, and 
hereby make tender to you pL-tW same, in fulfiljm^nt of oUr contract of sate to you of 



(^Tys^_,t_,2L, 



r/" 




WAREHOUSE 



A^L^^o^J^^^- 






K^^^A^ 



E. & 0. E. 



e^- 



QUANTITY 






frro 



^ 



'p 



y^io: 



UK 



I Cts_| 

\€~' 



%A 



DELIVERY NOTICE. 

Showing delivery on August 27, 1903, of 5,000 bushels corn by S. H. Wood- 
bury & Co. to Prmgle & Browning at 51 cents per bushel. The descrip- 
tion of the warehouse receipt as shown on notice is as follows: Dated 
June 3, 1903, 5,000 bushels No. 2 White Corn in Warehouse known as 
"South Chicago Elevator 'C and Annex" — Storage to the amount of 
$80 had accumulated on the gram, which is deducted by the sellers from 
the amount claimed by them. 



396 GOLD BRICKS OF SPECULATION 

minutes ,every morning collect and pay all local checks 
accumulated in the preceding twenty-four hours. 

This is exactly the method employed- hy the members 
of the Board of Trade of Chicago. Every ])usiness day the 
members having differences to pay or collect on transac- 
tions for future delivery, wherein delivery has l:)een found 
to be unnecessary and the parties have agreed to settle, or 
wherein delivery by notice has occurred, thus leaving a 
difference 1)et\veen the price at which the contract was 
made and the delivery price, send a statement to the Board 
of Trade Clearing-House, of all the various amounts 
they owe, or wish to collect, and the names of the parties 
to whom they owe balances or from whom they desire to 
collect. They offset one against the other and if they owe 
more than they claim, the}^ send a check for the amount of 
the difference with their statement ; but if they claim more 
than they owe, they call upon the clearing-house for a check 
for the amount of their claim, which is paid to them as 
quickly as the various statements can l)e checked up and 
compared, which requires al^out three hours. 

Like the l)anks, the mem])ers of the Board can, l^y pay- 
ing out or collecting one check, dispose of a large number 
of claims and counter-claims with perhaps a tenth part of 
the time and lal)or that would ordinarily l)e employed were 
it not for the facilities afforded by the clearing-house. 

This system of settling trades upon which delivery is 
unnecessary, and of delivering grain, provisions and 
seeds by notice rather than by allowing messengers to 
carry the valuable warehouse receipts from office to office, 
and the establishing of '' settlement " and '' delivery " 
prices, which are nothing more than figuring prices, and 
the method of paying and collecting balances through a 
clearing-house, the same as banks do, are the things that 



''FUTURES'" 397 

seem to be beyond the comprehension of the average mind, 
and are the basis of criticism so fre([uently uttered l^y 
" paid " attorneys, or persons with only a superficial 
knowledge of the business. 

The grain and provision trade in '' futures " could be 
handled in a manner that would quiet all critics, but at 
additional expense which would have to be paid by the pro- 
ducer or consumer and without adding to the legality of 
the transaction or changing the manner of making it. 



398 GOLD BRICKS OF SPECULATION 



CHAPTER V. 

SPECULATION. 

The morality of speculation ; impossible to define where speculation 
begins and business risks end ; speculation in agricultural prod- 
ucts reviewed and approved by Industrial Commission ; functions 
of speculation. 

Speculation is inherent in the human constitution, and 
men have a legal and moral right to speculate, provided 
they do so reasonably, intelligently and at their own risks. 
Reasonable speculation is such speculation as cannot 
seriously or permanently affect the resources or position 
of the persons indulging in it. Intelligent speculation is 
such speculation as is indulged in only after a thorough 
investigation and study of the subject of the speculation. 

While persons claim the right to risk that which is their 
own in speculative ventures, they frequently forget that if 
they have others dependent upon them the risk is shared 
by the wife, the children or others, and should reverses 
occur the loss would be a hardship to be borne equally by 
these persons. Hence, I believe that the venture should 
be limited so that it may not affect any one aside from 
the person making it. In entering upon a speculative deal, 
care should be exercised as far as possible to eliminate all 
elements of risk outside of the change in value of the com- 
modity of property dealt in. 

Discussed i>.y Bradstreets. 

Bradstreet's, a recognized authority on all matters re- 
lating to trade and commerce, discussed speculation as far 
back as 1887, in a clear and unprejudiced article, w4iich 



SPECULATION 399 

even at this late day is applicable to the situation. It 
said: 

To define exactly where the legitimate risks of business end and 
where speculation begins is an almost impossible task. It is a truism 
that beyond the simplest operations of trade all business necessarily 
at times approximates to a speculative character, and that more and 
more all markets and all commodities become the scene and the ob- 
jects of speculation. IMaterial facts and considerations will be found 
in the long run to govern the general direction of values of exchange- 
able objects; but one outcome of the highly complex organization of 
the world's commerce growing out of the increase of wealth and of 
facility of intercommunication, together with the advance in indus- 
try, has been to foster operations of a purely speculative character. 
In nearly every direction the body of mercantile transactions is 
largely composed of and the course of values is affected more or less 
by speculative operations. Directly or indirectly large portions of 
the profits derived from legitimate industrial and commercial enter- 
prises find their way into the current of speculation, while an in- 
creased or diminished degree of commercial prosperity shows a cor- 
responding" ebb or flow tide of speculation. These tendencies char- 
acterize to an increasing extent all departments of trade, though, 
of course, it must be considered that the greatly expanded volume 
of the world's business operations swells the dimensions, even 
though it may not in all cases increase the proportion of a specu- 
lative nature. 

In the great stock markets of the world, around a certain nucleus 
of transactions, based upon the demand for investments of a nego- 
tiable and convertible nature, vast aggregations of purchases and 
sales are centered, in which speculation in its most concentrated 
form is a moving impulse. The legitimate transactions of investors 
are, of course, an important element, but their proportion to the 
whole sum is comparatively small. Most transactions are operations 
of the professional operator — the " jobber," " large trader,'' the 
" speculative managements " of corporations, and '' manipulators," 
who act more or less upon information as to the material conditions 
and prospects of the securities or on the tone and temper, not only 
of their own, but the international money and stock markets as well. 
Outside of this the irregular and varying participation of the general 
public, which, approaching in some instances to the action of the 
investor, runs to some extent into a gambling spirit, and is in fact 



400 GOLD BRICKS OF SPECULATION 

made up of operations by outsiders in commodities which they know 
nothing about. It is speculation without any disguise, and it is for 
the encouragement and conduct of this class of transactions that 
much of the elaborate machinery of the modern exchanges has 
been constructed. To enable people to speculate in stocks upon a 
modest foundation of capital, the London and European Stock 
Boards have their settlements and " carrying over " of accounts 
and the American exchange the speculation upon " margins." 

The vast activity of which the stock markets are the scene and 
the magnitude of the interests they involve develop and employ a 
large proportion of the highest type of modern commercial intelli- 
gence. In the main this is concentrated, however, upon the individ- 
ual interest of its possessors, while the literary activity, often of a 
high order, employed in the same connection has for its main object 
the exposition merely of the actual facts or influences of the moment 
respecting the course of the market. 

Approved by the Industrial Commission. 

The Industrial Commission, created Iw Act of Con- 
gress, approved June i8, 1898, was composed of fiv^e Sen- 
ators, five Representatives, and nine other persons repre- 
senting the industries and employments. After an investi- 
gation covering more than three years, this Commission 
embodied in its reports its conclusions as to the functions 
of Speculation in Agricultural Products, and in its 
final report, approved of the present system of contracting 
for future delivery. 

The scope of the Commission's inquiries was broad and 
was defined in Section Two of the Act creating it, as fol- 
lows : 

" Sec. 2. — That it shall be the duty of this Commission to investi- 
gate questions pertaining to immigration, to labor, to agriculture, 
to manufacturing, and to business, and to report to Congress and 
to suggest such legislation as it may deem best upon these subjects." 

The reports of this Commission filled nineteen large 
volumes and in them every phase of our industrial life is 



SPECULATION 401 

discussed. Volume \'l, presented to Congress on January 
15, 1 90 1, is devoted to the discussion of the "Distribution 
OF Farm Products." The Commission's Final Report — 
\^olume XIX — was issued early in 1902. In transmitting 
it to Congress, the Commission said : 

" It presents a substantially complete epitome of the industrial 
life of the nation and of the important changes in business methods 
which have taken ])lace in recent years, with a discussion of some 
of the economic problems which confront the people. 

" Any reader of the reviews in this final volume cannot but be 
impressed with the immensity and complexity of the industrial life 
of the nation and with the fact that nearly all kinds of business 
have undergone almost revolutionary changes in recent years. It 
would now seem impossible to legislate wisely or to conduct business 
prudently without obtaining knowledge of these new conditions. 
It is not presumptuous to say that most students of these reports 
will find manv revelations of business methods and complications of 
which they knew little before, and will have a liberal education in 
the economic problems of the day." 

With unlimited opportunity, in point of time, money, 
and the power to subpoena witnesses, and to visit all sec- 
tions of the country, this Commission, after its investiga- 
tion into the methods employed to distribute the surplus 
crops of the cotmtry, unreservedly took the ground that 
the grain speculators were friends of the farmer. The 
report was concurred in by every member of the Commis- 
sion and was signed by the chairman, the late Senator 
Kyle, of South Dakota, who was originally a strong 
Granger and a Populist, but who had been convinced that 
the old crusade against Boards of Trade was a mistake. 

Senator Kyle's Commission stated that the American 
system of distributing farm products was " essentially a 
speculative system from beginning to end," and it believed 
that both the producer and the consumer were benefited 
thereby. Somebody must take the speculative risks of 



402 GOLD BRICKS OF SPECULATION 

changes in the market between the time when the crops are 
harvested and the time when they are used by the con- 
sumer. The farmer might store his grain himself, but he 
would have to insure it and take the chances of loss in 
various forms. This would require more capital than he 
possesses, and if he were to borrow for this hazardous pur- 
pose he would have to pay higher interest than before. 
For similar reasons the consumer cannot store the grain 
in large quantities and keep it until he is ready to use it. 
The result is that a separate class of experts has been 
developed who make it their business to store the crops 
and take the chances of loss and gain involved in that call- 
ing. The speculators of the corn and wheat pits are the 
distributers of the nation's farm products. The Commis- 
sion found that these men did the work on a closer margin 
of cost than the farmer could do it. Thus the producer 
gets better prices and the consumer gets cheaper bread 
than if there were no professional speculators. Intense 
competition among the dealers themselves tends constantly 
to cut down their own profits and to bring the producer 
and the consumer closer together. The dealers are forced 
constantly to seek to reduce the risks of their business, 
while the mails and the telegraph enable the farmer to keep 
informed as to the latest conditions of the market. The 
grower can convert his crop ([uickly into cash capital and 
turn his attention to preparing for the next crop, leaving 
the speculators to attend to the risks and worries of dis- 
tribution. 

The Commission is correct in its conclusion that Boards 
of Trade are legitimate and useful institutions which per- 
form a definite function and are of value to the farmer. 
All farmers would be convinced of this fact, as the late 



SPECULATION 403 

Senator Kyle was, if they could study the subject in all 
its aspects, as he did. 

In view of the exhaustive character of the investiga- 
tions carried on by this Commission and the weight that 
its conclusions should carry with them, 1 am convinced 
that the matter is sufficiently important to warrant the use 
of the space required to present the Commission's strong 
points, which are embodied in the following excerpts : 

SPECULATIVE DISTRIBUTION LOCALIZES RISKS. 

The first fact to be recognized in the survey of the American 
system of distributing farm products is that it is essentially a specu- 
lative system from beginning to end — speculative in the sense that 
after the products pass out of the producers' hands and until they 
pass mto the consumers' control, there is not a moment nor a stage 
in the distributive movement during which the one who has legal 
control over the property in question does not run the risk of a rise 
or fall in the value of the property. With the growth in the volume 
and scope of production and in the variety and the complexity of 
operations involved in the marketing of the products of the farm 
there have grown up gradually classes of men and commercial 
methods peculiar to the purposes and conditions which call them into 
existence ; but in the vast army of men and in the infinite variety 
of methods there is not a single responsible agency engaged which 
is not in some way required to assume liability for loss or gain 
from changes in value occurring in the course of distribution from 
the producer to the consumer. In brief, the risks of distribution 
are shifted by both producers and consumers upon the distinct class 
of speculators known as distributers, who make it a business to take 
such risks and to divide them up among themselves on the basis of 
net profit on capital and cost of business capacity. This, in the final 
analysis, is the underlying fact in the system of distributing farm 
products in the United States. 

THE ESSENTIAL FEATURES OF THE DISTRIBUTIVE 

SYSTEM. ^ 
The first thing to be recognized in our inquiry is the nature of 
the main fact under consideration. We have first to point out that 
the system of distribution of farm products is essentially a specu- 
lative system — a system of risks and adjustments of present and 



404 GOLD BRICKS OF SPECULATION 

prospective resources to present and prospective needs among com- 
munities, local, national and international. This system is not, more- 
over, a matter of recent invention. It is the product of our own 
economic history as a land-loving and city-building people. Stated 
in the form of propositions, this distributive system presents itself as 
follows : 

I. — The existing system of distributing that portion of the sur- 
plus farm products which is required for domestic consumption is 
the necessary outgrowth of the fundamental division of labor 
between town and country in our national development. 

II. — This distribution of surplus farm products, regarded as a 
commercial system, is a development out of the constantly widening 
distance between the areas of surplus production and the centers 
of consumption arising from the territorial expansion of the United 
States. 

III. — The distribution of the excess of surplus farm products 
among the deficit nations of the earth — that is, the distribution of 
that portion not required for domestic consumption — involves so 
many elements of risk to capital and labor as to make this world- 
wide service to society a distinctively speculative business, of an 
altogether too hazardous character for producers or consumers -to 
render without subjecting society to still greater risks of providing 
a regular food supply. 

\Y. — These speculative risks, inseparable from the international 
distribution of surplus farm products, have mevitably reacted upon 
producing and consuming nations in such a way as to develop a new 
division of labor, that of capitalist-speculator, whose function it is 
to relieve both producer and consumer of the hazards of distribution, 
so that the surplus of one portion of the earth ma>' regularly be 
supplied to the deficient portion at such a price as will in the long run 
a little more than balance the gains and losses of this species of 
commercial enterprise without unduly enhancing the cost to the con- 
sumer or unduly depressing the margin of profit to the producer. 

• THE DISTRIBUTIVE FUNCTION OF SPECULATION. 

Why has commercial distribution in the United States become 
so largely identified with a speculative class of trading capitalists? 
The answer is, that it has been found best for the producing and 
the consuming interests of the community that the risks of distribu- 
tion should be localized in a separate commercial class whose mem- 
bers are in a position to inform themselves as to all the factors, 
past, present, and prospective, aiTecting the future course of prices. 



SPECULATION 405 

If the risks of distribution fell upon the farmer, it would increase 
materially the risks of capital required and thus raise 'the rate of 
interest he should have to pay as producer, because increased risks 
always raise the rate of interest. This would increase the cost of 
production and consequently tend to reduce consumption by rise 
of price to consumers. Such rise of price beyond a certain point 
would reduce the volume of trade. If consumers assumed the risks 
of distribution there would be ver}' inadequate provision for the 
future. Irregular supply of subsistence soon breaks down the 
economic efficiency of consumers, besides impairing their regular 
consuming capacity as customers of the producer. Hence the com- 
numity — producers, traders and consumers — all suffer together. 
Regularity in supply of the means of subsistence is a great desid- 
eratum in economic welfare, but it is so automatic a process that 
we really do not notice how it is accomplished. The work is done 
through the medium of a market price ; a higher price brings forth 
more, a lower price brings forth less. Now it is the speculator who 
has to decide in advance on the price at which a regular supply will 
in all probability be forthcoming from producers in sufficient quan- 
tity to meet the regular requirements of the consumer. One specu- 
lator might place the future market price too high, another too low, 
but as a class they correct and check one another. It is to their 
interest as distributers to call forth all that the consumer will take, 
and no more. Speculators as a class are, therefore, interested pri- 
marily in a correct judgment, as much so as is either the producer or 
the consumer of the product in which the trader speculates. If, for 
instance, the Liverpool wdieat speculators should, through an error 
of judgment or calculation, set the price of May wheat lo cents 
below the correct w^orld price, the surplus stock would meanwhile 
be disturbed elsewhere until the shortage in the Liverpool supply 
became evident from a rise in the price paid by consumers. This 
would bring some of the misdirected shipments to Liverpool, but 
not so much as if the blunder had not been made in the beginning ; 
other places, whose speculators more correctly anticipated future 
prices, w^ould supply themselves more fully than usual. Thus the 
volume of trade at Liverpool would be reduced by a valuation too 
low to bring an adequate supply ; the consumers' customary demand 
would be inadequately supplied at the undervalued price, and the 
total expenses of distribution increased by the defective judgment 
of the speculator. 

These tw^o kinds of service are peculiar to speculative distribution 



406 GOLD BRICKS OF SPECULATION 

— the service of assuming the risks that arise from changes in 
the relation of demand and supply, and the service of giving the 
right direction to the commodities available for consumption. Even 
in famine-stricken India the government regards speculative distri- 
bution of supplies as on the whole far more efficient than any 
bureaucratic distribution could be. Without this, modern markets 
would be deprived of a very great share of their efficiency in serv- 
ing producers and consumers. In fact, those who have thought out 
the subject most thoroughly have found in this directive work of 
speculation the chief justification for its existence. Where govern- 
ment has assumed even part of the risks of crop distribution, as in 
Russia, piles of wheat rot in one section while people starve in 
the next. 

" The central feature," says Professor Emery, " in the economic 
organization of modern society is the market. From the point of 
view of the individual the production and distribution of com- 
modities are carried on with a view to their exchange. The regu- 
lator of exchange, and therefore of production, is value. Conse- 
quently the producer will expend his energies on such commodities 
as will have the greatest market value as compared with the expenses 
of production, just as the merchant will take them to the market 
where they will cc^mmand the highest price. Rut this adjustment of 
production and distribution according to values will be accurate 
only when he thinks he can get a return greater than his outlay. 
The merchant buys only when he thinks he can sell at a higher 
])rice. In both cases there is always the risk that before the produc- 
tion is completed or the sale made the value of the commodity may 
fall. Similarly, there is a chance that it may rise. In one case there is 
a loss, in the other a gain, to the pro(hicer or the merchant. Hence, 
it may fairly be said that the test of the perfection of the organi- 
zation of trade is the promptness with which such changes are 
learned and the accuracy with which they are predicted. It is by a 
due appreciation of this fact that one comes to a realization of the 
importance of organized speculation. If it is found to be the means 
of making the needed prediction, it will also prove itself the chief 
directive influence in the economic field in w^hich it prevails." "^ 

Speculative dealings in farm products have then these three facts 
to consider : the distance between producer and consumer, concen- 
tration and distribution of surplus crops at the right times and 



* H. C. Emery, Speculation on Slock and Produce Exchanges of the 
United States, pp. 101-2. 



SPECULATION 407 

places, and the formation of a business judgment based on the 
ratio of the visible supply of the world's grain and cotton, for 
example, to the customary demand of its consuming communities. 
The scope of this task of forming a judgment upon world-wide 
conditions, and forming it accurately enough to stake millions of 
capital upon it, is perhaps the heaviest hazard in our whole modern 
economic organization of society. lUit some class of investors must 
do it, or consumers must pay a higher price for their product, and 
producers miist be content to enter the market with fewer competi- 
tors ready to buy and carry their surplus. Producers and consum- 
ers together, without the speculative mechanism at work, would have 
to divide the risks of distribution between them. Neither of these 
interests is prepared to do this. Sound commercial policy is the 
best served by rational division of distributive labor, in which eco- 
nomic freedom and economic responsibility are equally respected. 

The economic services of speculative agencies engaged in dis- 
tributing farm products are threefold : 

I. — They localize industrial risks among a commercial class 
whose special function it is to distribute surplus supplies over deficit 
times and places in such a way as to lessen the uncertainty of pro- 
ducers and consumers. 

2. — They relieve producers and consumers from carrying a 
whole year's stock, enabling the former to convert his crop promptly 
into cash capital and the latter to supply himself as his periodical 
needs may require without enhancing prices beyond the ordinary 
rate of risks and returns of such capital investments. 

3. — Competition of speculative dealers tends more than any other 
force to reduce profits of these agencies to a minimum per unit of 
commodity handled. Released from other economic functions, it is 
to their interest to seek to reduce the risks of distribution to a 
minimum. By expert acquaintance with the conditions that involve 
risks the hazardous elements are gradually limited if not entirely 
eliminated. 

Special Report on Speculation and Prices of Wheat 

AND Cotton. 

Prepared by Mr. N. U. Stone, Statistician of the Bureau of Eco- 
nomic Research, New York. . 

I. GENERAL DISCUSSION OF PRINCIPLES. 

The question to be answered in this discussion is : " Does specu- 
lation tend to lower prices?" If so, are the fluctuations of such a 



408 GOLD BRICKS OF SPECULATION 

character as to injure the interests of the farmer as against those of 
the dealer or speculator ? 

That speculation tends to lower prices permanently, even the 
most outspoken opponents of the system of dealing in futures have 
not undertaken to charge. What is generally urged is that the 
professional short seller, by his sales of fictitious wheat or cotton, 
creates a fictitious over-supply in the market, which is just as instru- 
mental in depressing prices as would be an abnormally large supply 
of actual wheat thrown on the market by the farmer. 

Before we turn to the figures presented in this discussion let us 
briefly review the usual dealings in the speculative market and 
notice the effects of the operations of the two sides constantly 
working the market in opposite directions, the " bulls " and the 
*' bears." Let us first follow the action of a " bear '' who sells 
October wheat in July, hoping for a fall in prices, or, as some would 
have it, hoping to depress prices. 

The immediate effect of such a future sale upoii July spot prices 
will be practically nil, for the October wdieat cannot satisfy the 
immediate demand for spot wheat. What effect will the sale have 
on prices of spot wheat in October? The short seller of July 
appears now as a buyer in order to cover his contracts, and if his 
trading has any effect on the market at all it is to increase the 
demand, not the supply. As far, then, as he can influence spot 
prices, i. c, prices paid to the producer, it will be in favor of higher 
prices and not of lower. If the conditions of the market are such 
as to result in low prices, that is, to the " short seller's " advantage, 
then, because they are such, he must hasten to bu\ up the necessary 
amount of wheat which he originally undertook to deliver during 
that month ; and by so doing, he and his fellow " bears " create an 
increased demand wliich checks the prevailing tendency to lower 
prices. 

To sum up : While the short seller may at times be in a position 
to depress future prices by creating a fictitious over-supply, when 
it comes to spot prices, /". c, the only prices wdiich are of any prac- 
tical interest to the farmer, the " bear " appears as a buyer and 
thereby, if at all influencing prices, must raise them.'^ 

Let us look now at the bull side of the market. The " long " 
has bought a quantity of wheat in July to be delivered to him by 



* It is true that spot prices frequently move in sympathy with future 
prices, and to that extent the depression of futures seems to lead to a fall in 
spot prices. But, as will be .-^hown hereafter, the two phenomena are the 
effects of another common cause. 



SPECULATION 400 

the " short " in October. Again, as in the case of the " bear," the 
transaction will have no elYect upon current spot prices. hLven if we 
were to admit that the speculative purchases and sales for future 
delivery could aflfect current spot prices, the opposite effects of the 
transactions of the bull and the bear would balance each other. 
What will be the effect of the transaction on spot prices in October ? 
The original " long " appears now^ as a seller in liquidating his pur- 
chases, and to that extent apparently increases the supply and forces 
down prices. lUit it is only apparently, for in reality he cannot 
add one grain to the actual supply on the market. The wheat he is 
ready to sell has just been delivered to him by the original " short " 
seller, and would have just as surely been offered for sale bv the 
farmer if there were no " short " sellers and "long " buyers in 
existence. It may be urged that the same quantity of wheat, which 
would have been sold but once by the farmer, is now offered first 
by the farmer to the short seller, next by the short seller to the long 
buyer, and finally by the latter again to somebody else, thus swelling 
the apparent supply and tending to lower prices. But in all such 
cases the fictitious supply has been met by a fictitious demand, wdiich 
have all been balanced long before the month for which the con- 
tract had been concluded has arri^'ed. 

Our analysis thus shows that as far as there is a speculative 
influence in depressing prices, it is not exercised by the much abused 
short, but by his opponent, the bull. A casual glance at the ordinary 
market reports in our financial and trade papers will reveal no end 
of passages like the following : 

" The market for wheat futures broke badly under free selling by 
tired ' longs,' prompted by dtiU and depressed foreign advices and 
favorable crop accounts from the Northwest. Subsequentlv a 
stronger turn to European advices, particularly from the Continent, 
accompanied with buying orders, fear of crop damage in the North- 
west by frosts, and a small movement of the new winter wdieat 
crop, stimulated a brisk demand from ' shorts ' to cover contracts, 
and part of the loss was recovered." {CoininerciaJ and Financial 
Chronicle, July, 1895, p. 79.) 

" Prices advanced on a brisk demand from the ' shorts ' to cover 
contracts, stimulated by reports of crop damage in the Northwest. 
^ ♦ ♦ To-day the market for wheat futures opened higher, "^ * 
* but immediately weakened and declined under realizing sales 
by ' longs.' " {Chronicle, July 27, 1895, p. 161.) 

The foregoing references to depressing effects on prices caused 



410 GOLD BRICKS OF SPECULATION 

by realizing- operations on the part of " longs " niay seem to con- 
tradict what has just been stated in regard to the inability of the 
*' bull " to depress prices by a fictitious over-supply of wheat, but it 
will be observed that in the first place it does not follow as a result 
of a deliberate attempt by the bulls to depress prices by indiscrim- 
inate selling, for that would be against their own interests, but as 
a result of unfavorable conditions of the market which compel the 
bull to " realize " in order to come out with as small a loss as pos- 
sible. In the second, the " panics " and " slumps " usually referred 
to in the market reports relate to future prices only ; they do not 
refer to spot prices. A realizing transaction by a " long " carried 
out as a measure of self-protection in a panicky market is not a 
sale of spot wheat, but of a contract wheat which he was to receive 
in the future. Spot prices may and may not move in sympathy 
with the future prices, according to conditions of actual demand and 
supply. If the immediate demand is not great, prices will usually 
decline, and yet need not decline to the extent thev do in the 
" future " market. This explains why spot prices are sometimes 
above future prices for the same month, although, as a rule, the 
latter are higher than the former by the amount equal to the cost of 
storage of the grain in the warehouse. 

In the case quoted above, viz., July 13, 1895, the spot price of 
No. 2 red winter wheat was 7i-)4 to 73'/' cents although the price of 
July wheat was 71^ cents, /. c. below the mininunn price bid for 
spot wheat. 

'' But,'' say the opponents of " futures." " does not the selling 
for future delivery at a time immediately following the gathering 
in of new crops tend to keep prospective buyers out of the market 
who would otherwise have to buy their supplies at once ; and is not 
that equivalent to a contraction of the actual immediate demand 
equal to the amount of the fictitious supply? " The argument seems 
plausible. The trouble, however, is that its authors fail to remem- 
ber one important point. 

The professional speculator is in the market not for the purpose 
of either depressing or raising prices. He is as ready to make 
monev on a rise as on a fall in prices. In either case he will try to 
ascertain what the probable tendency of the market is before he 
embarks in any undertaking. Xo speculator or clfque of specu- 
lators in their senses would undertake to try to depress prices in the 
face of a rising market. Such Jlttempts are made at times by " bear 
rings " after they have already sold in anticipation of a fallingr 



SPECULATIOX 411 

market and think that by bold manipulation they may for a time 
create a panic in the face of an opposite tendency of the market and 
get out before a reaction sets in. But the repeated failures both of 
bull and bear cliques have not only served to teach speculators a 
lesson and thus to diminish the number of such ventures, but are also 
the best proof that the "bear" is by no means the only factor in 
tlie market. 

Such being the case, the '" short seller " in making his contracts — 
say in October, the month during which the farmer disposes of 
most of his produce — for future delivery a few months hence, will 
discount all past and future conditions that may be foreseen in fixing 
the price for future delivery. As a matter of fact the October 
price of December wheat is always higher than the October price 
of spot wheat ; likewise the December price of May wheat is always 
higher than the December price of spot wheat. 

What does this fact signify? Simply that when speculating for 
a fall of prices in the future, the " short " fixes in his mind the 
probable maximum which they will reach at the time for which 
the contract for delivery is made, and he contracts to deliver at a 
price a little above that maximum in order to make a profit. If 
prices should subsequently fall below that expected maximum the 
" short " will make a profit, the greater the difference the greater 
being his gain ; if they should go above, he will lose ; but in no 
case will a short seller agree to sell at a lower price than he thinks 
is going to rule at the time he has to cover his contract. 

But the opponents of dealings in " futures " are ready with 
another argiunent. Speaking of speculations in middling cotton, 
the Senate Committee on Agriculture and Forestry has this to say 
in its report : " In fact we find '^' ■•' ■■' that uniformly sales of 
futures are made on every day at a lower price than the value of 
middling on that day." The inference implied in this statement is 
that because cotton futures for the current month are always below 
the spot prices on the day when contracts for future delivery are 
made, they have an effect of depressing the spot prices. 

If that were the case we should look for a gradual decline in 
spot prices in the course of each month, but a glance at the tables 
of daily cotton prices will convince us that no such thing takes place, 
prices going up and down in the course of the month according to 
circumstances. 

But we need not rest our conclusions on mere negative proof. 
Let us analyze somewhat deeper the assertion of the Senate Com- 
mittee. To quote the passage in full : 



4:12 GOLD BRICKS Of SPECULATION 

" We find that the very form of the contract — a sale of cotton 
generally to deliver any or all of about 30 grades upon what is 
called the basis of one grade alone as the fixer of the price — neces- 
sarily depresses the price. In fact we find, while these sales are 
made on the basis of middling — /'. c.^ for a price which represents 
the value of middling cotton — that uniformly sales of futures are 
made on every day at a lower price than the value of middling on 
that day." (Report of the Senate Committee on Agriculture and 
Forestry, Fifty-third Congress, third session, \^ol. i, p. XIII and 
XIV.) 

Thus we see that the distinguished committee finds fault first, 
not so much with the system of '' futures " itself, but with the 
fact that the contract for delivery is not limited to one grade only, 
and consider the lower prices of futures as the inevitable conse- 
quence of that condition. And yet in the case of wheat contracts 
a similar rule is observed without leading to any such results. On 
the contrary, prices of wheat futures are as a rule somewhat above 
spots by the amount e(|ual to the cost of storage, insurance, etc. 
How is the difference to be accounted for ? It is due to an important 
difference in the provisions for the deliveries of the respective prod- 
ucts. In the case of wheat, if the seller is unable to deliver at the 
required time the contract grade of wheat, he has the option to 
deliver any higher grade, and the buyer is compelled to accept it 
after paying the seller the market difference bet^ween the values of 
the grade received and that contracted for. In 'the case of cotton 
the rule is reversed, and the seller may deliver almost any grade 
poorer than the contract grade — middling cotton — the buyer being 
compelled to accept it after deducting from the price the market 
difference between the values of the grade delivered and middling. 
This creates an anomalous situation, and is considered a great evil 
bv man^" people in the trade. A manufacturer or broker who knows 
he will need in the future a certain quantity of middling cotton buys 
it for future delivery, and yet is not sure that after the contract 
has been carried out by the other party he will get what he wants. 
The chances are that he will get a grade that he cannot use, and 
to insure himself against possible loss he pays a lower price than 
what he would be willing to pay for middling cotton. 

The uniformly lower price of future cotton as against spot is, 
therefore, not due to the fact that " one grade alone " is used " as 
the fixer of the price," but to the fact that, unlike in the case of 
wheat, poorer grades than that contracted for may be forced upon 



SPECULATION 413 

the purchaser, who is thus obHged to discount the price as a means 
of insurance against possible loss. 

But, that being the case, is not the power for evil on the part of 
future sales as a competitor of spot sales considerably cut down? 
If intending purchasers of cotton can not rely as well on their 
future contracts as do the purchasers of wheat, does not that tend 
to raise the value of spot cotton, the only one dealt in by the pro- 
ducer, as compared with future cotton? Of course it does, as the 
testimony of the committee just quoted duly bears witness. 

In analyzing the dealings of " bears " and '' bulls " we assumed 
that they speculate on " futures " for many months ahead. Would 
the conclusions we arrived at hold for futures maturing in the 
month during which the contract is made? If, as the opponents of 
futures maintain, the " shorts " could depress prices at pleasure 
by continual offers, and make their profits by buying subsequently 
the wheat contracted for at lower prices, the question of easy acqui- 
sition of wealth would forever be solved, and failures through specu- 
lation would become a thing of the past. All that a man of mod- 
erate means would have to do to get rich would be to sell wheat, 
through some broker, for delivery during the current month, buy 
an equal quantity at a reduced price at the end of the month, and 
count up his profits. The trouble with the scheme, however, is that 
in order to sell there must be a buyer, and the buyer speculator 
is as much after profits as the seller. It then becomes a question 
as to which of the two sides has the longer purse and, above all, 
the conditions of the market in its favor. 

A glance at a table of daily quotations of " future " prices, either 
of wheat or cotton, will convince anyone that " futures," and 
'' spots " as well, just as frequently go up in the course of the 
month as they go down. 

This leads to the conclusion that so far from being the cause of 
low prices short selling is rather a consequence, in the sense that 
it is indulged in only when it is thought that the natural tendency 
of the market is such as to favor a trend of low prices. 

CONCLUSIONS. 

The depression in prices of agricultural products during the few 
years previous to 1898 has been no doubt responsible for most of the 
opposition to speculation in " futures." The several interests con- 
nected with the raising and marketing of these products feel that 
'' something is wrong," and in search for the cause of the evil 



414 GOLD BRICKS OF SPECULATION 

naturally turn against speculation as the most prominent factor in 
modern business life. That the condemnation of speculation is the 
result of misunderstanding and bitter feeling rather than intelligent 
research may be seen from the fact that it is quite frequently made 
on conflicting grounds, according to the interests involved. 

Thus, to quote Dr. Emery again : " It is not so many years 
ago since a large and representative meeting of Western American 
farmers passed a resolution against options on the score that they 
tended to unfairly reduce the price of wheat, and it was just three 
weeks after that meeting that a convention of the National Associa- 
tion of American Millers, attended by some 500 members, was 
held in Minneapolis, and passed a resolution condemning options 
on the ground that they unfairly raised the price of wheat." ''' 

At the recent Chicago conference on trusts, Mr. S. H. Greeley, 
of the National Grain Growers' Association, accused the railroad 
and elevator owners who deal in " futures " of unfair methods in 
dealing with grain. On the one hand he charges them with depress- 
ing prices paid to producers by means of agreement not to bid in 
the same territory ; '^'''' on the other, he adimts, by citing Judge 
Tuley, '* that the warehouseman gets the grain " over the heads of 
other grain dealers " because he pays more for it than other bid- 
ders," an argument which is dismissed by the eminent judge with 
the simple statement that ''no monopoly in grain dealing can operate 
in the long run to the interest of the producer," and that '' there is 
no truer maxim in economics than that competition is the life of 
trade." "^"^"^ Mr. Greeley voices in his paper the grievances of the 
small grain dealer who is unable to pay as much to the producer 
(farmer) as the large warehouses pay, since the latter, being in 
league with the railroads, can afford to pay a higher price to the 
farmer and yet make a profit. 

It is true that hundreds, or perhaps thousands, of small dealers 
are thereby driven out of business ; but this is due to the superior 
facilities of large capital, just as in any other industry, and not to 
speculation in futures. 

It is true that the monopoly, once established, may " in the long 
run " result in injury " to the interest of the producer," to quote 
Judge Tuley. But again, that will be due rather to the power of 
monopoly than to speculation. 



* Quoted from Bradstreet's Aug. 12, 1896. p. 542. 

** Official Report of the Conference, published by the Civic Federation 
of. Chicago, p. 203. 

*** Loc. cit., p. 20K. 



SPECULATION 415 

As we have attempted to show, it is a mistake to represent 
speculation in futures as an organized attempt to depress prices to 
producers. 

First. — Because every short seller must become a buyer before he 
carries out his contract. 

Second. — Because as far as spot prices are concerned, the short 
seller appears as a 1)uyer and not as a seller, and therefore, against 
his own will is instrumental in raising prices. 

Third. — Because as far as " future " prices are concerned the 
" bull " in speculative buying counteracts the effects of speculative 
selling of the " bear." 

Fourth. — Because the '' bull '' in his realizing operations when 
depressing prices is counteracted by the opposite effect of the " cov- 
ering " movements of the " bear," the two sides thus keeping the 
market price about where it would be kept in the long run if instead 
of " bulls " and '' bears " there would be ordinarily legitimate buyers 
and sellers. 

Fifth. — Because, as has been shown, future sales are not made 
at a uniformly lower price than the corresponding spot price, but 
on the contrary are on the average a little above spot prices to 
meet the cost of storage, interest, and other charges. 

Sixth. — Because, as has been shown, neither the ''bears" nor 
the " bulls " are uniformly on the winning side, but are about equally 
losers and winners, thus proving that one is about as important 
and influential a factor in the market as the other. 

Seventh. — Because evidence believed to be conclusive has been 
presented showing that, under speculation, prices prevailing at the 
time when producers dispose of the greater part of their products 
are greater in comparison to the rest of the year than they were 
before the advent of modern speculation. 

On page 185 of the Commission's final report is found 
the following, entitled: 

SPECULATION IN AGRICULTURAL PRODUCTS. 
It has frequently been urged that there should be remedial legis- 
lation in order to protect the producer from the speculator. Deal- 
ings in " futures " have at different periods since the rise of produce, 
grain and cotton exchanges in the United States been looked upon 
as one of the chief factors governing the prices of farm products. 
That is, speculative agreements as to future values have been 



4:1G GOLD BRICKS OF SPECULATION 

regarded as causing a rise or fall in the prices of agricultural 
products. 

This earlier view of speculative trading has been considerably 
modified by a more complete insight into the relation which specu- 
lation bears to commercial methods. 'It is now more generally held 
that speculation in its legitimate and normal function is primarily 
occupied in anticipating the price at which under all circumstances 
the producers' supply is likely to yield to the consumers' demand. 
The adjustment between these two factors — supply and demand — 
is all the more delicate because with each recurring year they exhibit 
more or less elasticity. The positions of producers and of consumers 
change. The commercial judgment must be recast each successive 
season and at all stages of the season. This task must be classed 
among the really valuable services of speculation in distribution. 

The three great functions which speculation performs in a free 
system of trading are : First, to localize the risks of distribution 
among a special class of experts presumably well informed as to the 
facts of supply, demand, credit, exchange and cost of distribution. 
Second, to relieve producers and consumers alike of the expense and 
risk of being responsible for a year's production, thus freeing the 
cash income of both of these economic interests for other uses 
than those of protecting and providing a long-term supply of util- 
ities. Third, to reduce the profits of trade by ready and active com- 
petition among the various speculative interests toward a minimum 
of cost per unit of commodity handled by conducting distributive 
operations on a large scale. 

Throughout the East and the West it appears to be the general 
practice of millers on a large scale, who make contracts for 
delivering flour in the future, to purchase in the market for ** fu- 
tures " a corresponding quantity of wheat against the contract for 
the delivery of flour which they have assumed. This system, as 
stated by entirely trustworthy representatives of the trade, has been 
found absolutely necessary in order to prevent the miller from 
assuming the extraordinary risks of changes in the market value of 
wheat. Only the more speculative and daring millers would under- 
take to fulfill future contracts without exercising this precaution 
of purchasing wheat " futures." In considering the cpiestion of 
whether buying and selling of " futures " is consistent with the 
welfare of the producer, this aspect of the practice must be regarded 
as buying and selling insurance against loss. 

The economic position of warehousemen in Handling agricul- 



SPECULATION 417 

tural products under the present system is somewhat shnilar to 
that of the miller. The warehouseman with a million bushels of 
grain in storage is obliged in some way to secure himself against 
loss from a fall in cash prices in the future by selling " futures " 
at a price which will cover his outlay. He thus absolutely elim- 
inates that million bushels of grain from the class of risks which 
the business has to run. 

A common evil of the grain, cotton and provision trades is over- 
speculation. Over-speculation is a result of the attempt to do too 
large a volume of business on a given amount of cash capital. The 
amount of cash capital which a trader can command depends verv 
ofenerallv on the amount of credit which his bankers are willingf to 
give him. It is therefore largely in the power of these trustees of 
the community's cash capital to check or favor over-speculation. 
Any laws that will fix and enforce upon banking institutions the 
responsibility for extra hazardous uses of funds intrusted to them, 
whether by their customers or the officers of banks, will go far 
towards checking over-speculation. 



4:18 



GOLD BRICKS OF SPECULATION 



CHAPTER VI. 



SPECULATION VS. GAMBLING. 

Definitions and comparisons ; they are separate and distinct acts ; 
service of the speculator to the farmer. 

I think it is well to define speculation and margins and 
gambling and wagers, so that there may be a clearer un- 
derstanding of the distinctions made throughout this work. 



Speculation 
(Enc. Diet.) 
The act or practice of buying 
goods, stock, etc., or of incurring 
extensive risks, with a view to an 
increased profit or success in trade ; 
the buying of goods, shares, stocks, 
or other purchasable commodity, in 
expectation of a rise in the market, 
and thus securing a gain to the 
buyer, or of selHng commodities in 
the expectation that prices will fall, 
and thus the seller will be able to 
buy similar commodities back again 
at a lower price. 

Speculation^ 
(Century Diet.) 
The investing of money at a risk 
of loss on the chance of unusual 
gain ; specifically buying and selling, 
not in the ordinary course of com- 
merce for continuous marketing of 
commodities, but to hold in the ex- 
pectation of selling at a profit upon 
a change in values of market rates. 
Margin 
(Century Diet.) 
The sum in money, or represented 
by security deposited by a speculator 
or trader with his broker as a pro- 
vision against loss on transactions 
made on account. 

Margin 

(Webster's Diet.) 

Collateral security deposited with 

a broker to secure him for loss on 

contracts entered into by him on be- 



Gamhling — Legal Definition. 

The art or practice of acquiring 
money or property by hazard or 
chance ; an agreement between two 
or more, to risk money upon a con- 
tingency, or chance of any kind, 
where one must be loser and the 
other gainer. 

Whenever money or other valu- 
able consideration is hazarded and 
may be lost, or more than the value 
be obtained by chance, it is gaming, 
nor will any name or device take 
it out of this category. 
Wager 
(Enc. Diet.) 

Something deposited, staked or 
hazarded on the event of a contest 
or some unsettled question ; some- 
thing staked by each of two persons 
in support of his opinion concern- 
ing a future or unknown event ; a 
stake. The party whose opinion 
proves to be correct receives what 
has been staked by both. By statute 
of the United States all contracts or 
agreements whether in. writing or 
parol, depending on wagers, are null 
and void, and the wager or money 
due thereon cannot be recovered in 
a court of law. A wager lost is, 
therefore, only a debt of honor. 
Wager 
(Webster's Diet.) 

A contract by which two parties 
or more agree that a certain sum of 
money, or other thing shall be paid 



SPECULATION vs. GAMBLING. 419 

half of his principal, as in the specu- or delivered to one of them, on the 
lative buying and selling of stocks, happening or not happening of an un- 
wheat, etc. certain event. 

Bet 

(Webster's Diet.) 

l^hat which is laid, staked, or 

pledged, as between two parties, 

upon the event of a contest or any 

contingent issue. 

It will be seen from the above definitions that gambling 
and speculation are two separate and distinct acts. But 
it is argued that some men lose in speculation while others 
profit, and there is an erroneous impression, even among 
traders themselves, that one man's gain is another man's 
loss. This conclusion of superficial minds is what links 
speculation and gambling together. Let us see: The 
wheat crop of the United States for 1903 is something 
more than 600,000,000 bushels. Suppose that the price 
of .wheat should advance 10 cents a bushel, or $60,000,000. 
Who would make the money? Why, the owners of the 
wheat, to be sure, unless they had sold it for '' future de- 
livery," in which case there should be no profit accruing to 
the holder; the speculator, having it bought for '' future 
delivery," would indeed derive the profit from the advance, 
but nobody would lose a cent. This profit would be the 
enhanced value of the property, not another person's loss. 

Let me show you how I could make $100,000 without 
a dollar being lost by any other person to offset my profit. 
Assuming that I am a wheat speculator and make a close 
study of conditions and influences liable to affect the value 
of that commodity, I conclude that under all the circum- 
stances of supply and demand at home and abroad wheat 
should sell at higher prices within the next three or four 
months. Acting on my judgment, I go into the wheat 
market and buy '' futures," say, in December for the next 
May delivery, to the extent of one million bushels. In 



420 GOLD BRICKS OF SPECULATION 

other words, I buy one million bushels of May wheat. My 
purchases are made of the owaiers of the great elevator 
or warehouse systems, who, when they sell me the May 
wheat, have actual w^heat on hand which they purpose to 
carry until May. The sales to me are effected at a price 
that will about equal the original cost price of the wheat, 
plus the expenses of carrying it until the month of delivery 
(May), including a fair rate of interest. 

Warehousemen make a business of buying and storing 
grain and then selling it for future delivery, their profits 
being the premiums paid over the cash or spot price for 
'' future-delivery " contracts. Hence, after I have made 
my purchase of one million bushels of jMay wheat from 
the warehouseman, I, as a speculator, shall gain if the 
market for May wdieat advances as I believed it would. 
But if it declines I shall lose on my speculation. It 
is different with the warehotiseman ; he cannot make or 
lose by reason of any change in the market. He has the 
wheat bought and sold, his profit is secin*ed, and nothing 
can change it. When May arrives I must take the wheat 
off his hands when he tenders it to me on the matured con- 
tract. If, in the meantime, the market has advanced ten 
cents a bushel, I can sell the w4ieat out and secure $100,000 
profit and no one has lost a dollar. If the market had de- 
clined ten cents a bushel between the time of my purchase 
of the future and the time of my sale, I should have lost 
$100,000, but no one wotild have gained what I had lost. 
The truth is that my gain or loss would be the added or de- 
creased value of the wheat, and not what someone else 
might have lost or gained. 

Whether I lose or gain is of no moment to the world, 
if it is my business to deal in this w^ay and I have ample 
means to take care of my obligations. But I have per- 



SPECULATION vs. GAMBLING. 421 

formed a distinct service to the agriculturist by providing 
a market for one million bushels of wheat at a time w^hen 
the consumer was in no hurry to buy, and when the wheat 
was accumulating in the warehouses. This is the function 
of the capitalist-speculator, who is as indispensable to the 
farmer of America to-day as is the railroad. With his 
cereal crops of more than four thousand million bushels 
each season, every farmer would have to be a capitalist, 
a warehouseman, a speculator and a distributer, in addi- 
tion to a producer, if it were not for the Exchanges and 
the speculator. 



422 GOLD BRICKS OF SPECULATION 



CHAPTER VII. 

PRODUCE AND COTTON EXCHANGES IN THEIR OWN DEFENSE. 

Being extracts from protests and memorials to Congress by Ex- 
changes and Exchange members ; future-dehvery contracts 
explained by those best informed as to their utility. 

Within the period from 1890 to 1894 there were sev- 
eral attempts upon the part of professed friends of the 
farmer in Congress to push through what were known as 
'' anti-option " hills. The proposed laws were intended to 
prevent the trading in " futures " on Exchanges, hy put- 
ting a prohibitive tax on all sales made l)y persons who did 
not have in their possession at the time the sales were made, 
the actual property to be delivered on such sales. The 
first bill introduced in Congress provided for a tax on 
'' futures " of 5 cents a pound on hog products and 20 cents 
a bushel on grain. 

The fallacy of this proposed legislation was clearly ex- 
posed and resulted, by reason of the agitation and discus- 
sion aroused, in emphasizing the necessity of the system of 
buying and selling for future delivery. 

These efforts at one time became so aggressive that 
Exchanges, bankers and wholesale merchants filed numer- 
ous and elaborate protests and memorials and arguments 
against the proposed legislation. 

The following extracts from the protests of the Board 
of Trade of the City of Chicago and other Exchanges 
against the passage of the '' Washburn " and '' Hatch " 
bills by the Fifty-second Congress (1892), are so clear-cut, 
simple and straightforward that they might well be perused 



EXCHAXGES IX THEIR OIVX DEFEXSE 423 

carefully by all classes of society, especially by those in- 
clined to criticise the methods of Exchanges. 

Extracts from the Argument of the Chicago Board of Trade 
Against the Hatch and Washburn '' Anti- 
Option " Bills, 1892. 

Contracting for future delivery has entered into every phase and 
feature of the industrial and business life of the civilized world. It 
is rare that an enterprise of any importance is now undertaken 
which is not predicated largely upon contracts for labor, money or 
supplies, extending into the future. 

A capitalist planning to build a house or a block, let it cost 
$1,000 or $1,000,000, contracts for its construction from beginning 
to end, makes his financial arrangements accordingly and, so far as 
he can do so, sells his floor space short — all before a spade is put 
into the ground. The various construction contracts are, in their 
turn, based, as far as may be possible, on contracts for the future 
delivery of materials and labor at an agreed price. The stone, steel, 
iron, brick, slate, mortar, wood and other materials may pass 
through twenty hands before they reach the person or persons orig- 
inally contracting to deliver the same. The original contract is 
none the less valid on that account though at the time it was made 
the party agreeing to deliver th<" property may have had no clear 
idea hov/ or where he was to get the property. 

The retail merchant, speculating on the probable requirements 
of the public, orders goods to meet these requirements. His wants 
are supplied by the wholesaler, who has anticipated these demands 
by contracting months before for the products of the mills, the 
factories and the farms. The mill owners, to fill their contracts with 
the wholesalers and jobbers, contract for the future delivery of the 
cotton or wool that Is to enter Into the manufacture of the cloth. 
The material may be nowhere in sight and the parties agreeing to 
deliver it may have to buy It of its thousandth owner instead of its 
first. The validity of the contract Is in no wise affected by the num- 
ber of times the property may have been transferred in going from 
the producer to the consumer, nor should It. The right of owner- 
ship passes, the same as It would In real estate or any other species 
of property. A gold coin loses nothing of Its value, though It passes 
through a million hands and cancels a million debts In Its travels. 

The clerk at his desk and the workman at his bench are solicited 
In May and Tune to contract for next winter's supplies of coal deliv- 
erable any month that may be named. Upon these contracts the 



424 GOLD BRICKS OF SPECULATION 

wholesaler gives his orders to the mine owners who in turn are 
enabled to intelligently anticipate the output of their mines and 
make arrangements accordingly. 

Our paper currency represents a Nation's contract to redeem the 
same in coin on demand, *' buyer's option." 

The idea, scheme and theory of contracting for future perform- 
ance permeates our very lives. It is the blood and bone and basis 
of our National, personal, commercial and financial existence. At- 
tempted curtailment of the privilege of entering into legitimate 
contracts for future performance would be a dangerous invasion of 
the domain of personal and private rights and liberties. * * " 

Gambling in farm products is an unmitigated evil, and there is 
not a legitimate exchange in the country that would not lend its 
aid and countenance to the enactment and enforcement of laws, for 
its extinction. =;= * * 

In simple truth, however, the extent to which produce gambling 
is carried on in the legitimate exchanges of the country is immensely 
exaggerated. It bears about the same relation to the legitimate 
commerce and speculation of the country that the froth and foam of 
Niagara do to the mighty volume of water underneath. It is the 
bubble and fuss and fury, the froth and foam upon the surface of 
trade and commerce that offends — not trade and commerce itself. 

Gambling in produce — gambling pure and simple, is carried on 
in the bucketshops. This form of gambling is and has long been a 
fruitful source of agricultural depression, and a rigorous Federal 
bucketshop law, vigorously enforced, might go far toward accom- 
plishing the end that is sought. The laying of wagers in these 
thousands of bucketshops, on the quotations of produce, as they 
are made in the great marts of trade, creates a powerful concen- 
trated interest for the depression of values. The extent to which 
this bucketshop influence is responsible for the agricultural depres- 
sion that is complained of is not, we fear, fully appreciated. The 
evil is of sufficient importance in our opinion to merit the attention 
of Congress. It has become a National curse. This Board does not 
apprehend that your honorable body confounds bucketshops with 
legitimate exchanges. Such a thought would be an insult to your 
intelligence. 

Boards of Trade are a necessity of modern commerce. They 
enable the producers to find a market at any time for their surplus 
grain, cattle, hogs, cotton and other crops, at far better average 
prices than could otherwise be obtained. America raises a surplus 
of almost every kind of farm product, and this surplus must be 



EXCHANGES IX THEIR OJVX DEFENSE 425 

sold to domestic and foreign consumers, else congestion results, and 
the country suffers from evils of over-production. 

It is through the medium of Boards of Trade that the capital is 
supplied for the carrying of the country's surplus products during 
the long and wearisome period that must intervene from the time 
it leaves the possession of the needy producer until it is taken by 
the tardy and reluctant consumer. The farmers are not, as a class, 
able to furnish the capital needed to carry the surplus of their 
crops. They are, as a general thing, obliged by the necessities of 
the situation to realize on their crops as soon as saved. This makes 
them urgent sellers during the few months immediately following 
harvest, and were it not for the helping hand of speculative and 
invested capital, the highways of commerce would be glutted with 
an unsalable plethora. The ultimate consumers to whom our surplus 
must be sold, if sold at all, would supply their requirements only 
as necessity demanded, and fathomless depression in values would 
ensue. The American farmer would be in a state as hopeless as the 
man " treading water," — no bottom and no rest. 

Enterprise and capital have created chains of warehouses extend- 
ing from the remote West and South to the seashore. Interior 
dealers obtain advances from the commission merchants at com- 
mercial centers, and buy and store the surplus of the country. This 
surplus is sold for future delivery at the larger markets, or as they 
are styled " Boards of Trade," " Chambers of Commerce " and 
" Produce Exchanges." 

It is immaterial to the producer or to the country dealer, whether 
his wares have been sold in Chicago, New York, St. Louis, New 
Orleans or any of the other great markets, to the consumer or to 
a speculator. He is only interested in knowing that the property 
on hand has been " placed " at a price that pays him a moderate 
profit on the money invested, and that a few months later, when it 
is forwarded, it will be taken and paid for. His contract of sale 
gives him assurance in that respect. '^ * * 

The right to so buy and sell enables grain and produce merchants 
to limit their losses, or realize profits at any time they may elect, 
between the formation of the contract and its maturity. 

The facility that is thus enjoyed for releasing capital attracts 
boundless cheap money into this branch of trade, which would be 
withdrawn upon the introduction of a disturbing factor tending to 
restrict dealings in futures. * * '^ 

These contracts in infinite number, representing actual property 
of very great value, form the basis of operations on the commercial 



i26 GOLD BRICKS OF SPECULATION 

exchanges. Speculation makes a market at all times for the property 
that is in transit from producers to consumers. It is the indis- 
pensable solvent. Property that can be realized upon without delay 
is security upon which fiscal institutions will make advances at the 
lowest interest rates, thus minimizing the cost of carrying, a state 
of facts which is of direct advantage to the producers, as it enables 
the dealer to pay more originally than he would be otherwise justi- 
fied in doing. 

When cereal reserves are nearest exhaustion, the combined 
visible supply of wheat in city and country warehouses ranges from 
20,000,000 to 35,000,000 bushels, and during the autumn and winter 
months the load that is being carried across the bridge upon the 
shoulders of capital sometimes exceeds 75,000,000 bushels. During 
the period of greatest surplus accumulations in the last year the 
*' visible supply " alone was 60,000,000 bushels. The average stock 
of wheat in this country available for immediate commercial use is 
close to 50,000,000 bushels. 

Not less than 100,000,000 bushels of corn in cribs along lines of 
railroads, or in public warehouses, is carried continually on advances 
from commission firms on the great exchanges and from local and 
city banks, farmers being relieved of the burden they are illy 
equipped to shoulder. 

Of oats possibly 30,000,000 bushels are bought of the producer 
and carried by middlemen in anticipation of consumptive require- 
ments. 

The product of from 2,500.000 to 4,000,000 hogs has to be simi- 
larly provided for, on an average, from one year's end to the other. 
The visible supply of American cotton, that is, the quantity that 
has passed from the producer and has not yet gone into the posses- 
sion of the consumer, ranges from 175,000 to 1,250,000 bales; the 
average " visible " may be put at 750,000 bales. 

The capital required to carry the enormous surplus of the few 
commodities enumerated above is shown with approximate accuracy 
in the following table : 

Avenr^^e Appi'oxhmite 

Commodity. Qnaniity. Home Value. 

Wheat (bu) 60.000,000 v$45, 000,000.00 

Corn (bu) 100,000,000 25,000,000.00 

Oats (bu) 30,000,000 6,000,000.00 

Hog product (lbs) . . . 450,000 000 27.000,000.00 

Cotton (bales) 750,000 35,000,000.00 

Total $138,000,000.00 



EXCHANGES IX THEIR OWX DEPEXSE 4:27 

The foregoing is unquestionably an inside estimate of the amount 
of money actually employed in carr}ing the surplus of the leading 
crops until such time as it may be needed by the Nation's customers. 
At times a vastly larger sum is employed in moving the crops, and 
rarely is a smaller amount needed. This enormous capital is an 
active, virile, substantial support to the values of agricultural prod- 
ucts, and not, as many ignorant or poorly informed persons imagine, 
a source of depression. * * * 

The inevitable tendency of speculation is to minimize the range 
of fluctuations and reduce business risks to the narrowest limits. 
The absolute truth of this statement is illustrated in the course 
of market values of commodities in which there has been most 
general speculation of late years, namely : grain, hog products, 
cotton and oil. The tide has ebbed and flowed with placid regu- 
larity. Speculation, within bounds, is quite as legitimate as manu- 
facturing, merchandising or banking, and serves quite as useful 
a purpose. Gambling is the abuse of speculation, and like any 
excess effects its own cure in the exhaustion of the resources of its 
votaries. As before remarked, gambling in farm products is merely 
the foam and froth on the surface. The real business is dominated 
by the well defined laws of trade and commerce. Like the fly on the 
wagon-wheel, the gamblers in produce may think they are raising 
a great dust, but they are really of minor importance. 

The following from the pen of a noted writer on political econ- 
omy, may further explain the utility of contracts for future delivery, 
the paragraph having direct reference to grain : 

** The only standard by which we can test these contracts is that 
of utility. Do their benefits outweigh tlieir mischiefs? Are the 
complaints against them founded in ignorance and want of thought ? 
If so, they are beneficent ; and if beneficent, then in every ethical 
analysis they are right. The advantages of future contracts in 
grain, founded on the system of grading grain in bulk, and issuing 
warehouse receipts for certain quantities of certain grades, and 
buying and selling these receipts, as compared with the alternative 
system of selling grain by sample, or on view, are so great that it is 
not too much to say that to provision the civilized world without 
the aid of such mechanism would be hardly less difficult than to 
transport to market the world's food material without the use of 
railways. A class of contracts which perform such services to com- 
merce ; which promote the production of the staff of life and 
cheapen bread and provisions throughout the civilized world ; whose 



428 GOLD BRICKS OF SPECULATION 

profits rest on economic law, and not on blind chance ; which give 
equality and firmness to the prices they are charged with disturb- 
ing, can only be belittled into bets by those whose knowledge of 
business is that of children. Their cost, if their benefit has a debit 
side at all, is not to be placed in comparison with their beneficence." 



Extracts from Protest of the Neiv York Cotton Exchange Against 

" Anti-Option " Bills, i8g2: 

We beg to submit herewith a protest of bank presidents and 
bankers of New York, by which it appears, that whatever the 
asserted evils may be, incident to this method of doing business, it 
afifords a measure of security and protection to legitimate traders 
and capitalists, as well as to the producers of the articles named 
and manufacturers, that is not to be disregarded. That the same 
machinery is made use of by speculators is freely conceded, but it 
is submitted that speculation is as old as commerce, and is as impos- 
sible of being stamped out as that commerce itself should be legis- 
lated out of existence. * '^ * 

While these bills do not pretend to be prohibitive, they neverthe- 
less are so by reason of the enormous tax that is levied, the real 
purpose sought to be accomplished being, not the raising of revenue, 
but the prohibition and destruction of the system. 

The advocates of the abolition of this method of doing business 
may claim that those engaged in this business are no better than 
gamblers, and therefore should be suppressed on the same moral 
grounds that any other, vice should be, but when it is considered 
that scarcely a merchant in any of the great markets of the world, 
interested in either grain, hog products or cotton, but makes use of 
contracts for future delivery of the various articles, and that, 
through their instrumentality, the crops are moved, whether as an 
incident thereto the system is also availed of by speculators or not, 
it hardly seems reasonable that this great class in the community, 
representing its industry and business sagacity, should be classed 
with gamblers, thieves and pickpockets, and be put under social 
and legal ban, in company with them, by the first law-making power 
of the nation. 

There are at present in warehouse, in the City of New York, 
nearly 400,000 bales of cotton representing $16,000,000 of value, 
which is owned by merchants and bankers, and agamst which, it is 
fair to assert, there are outstanding contracts for delivery in the 



EXCHAXGES IX THEIR OWX DEFEXSE 



429 



future for at least 300,000 bales, if not more. The same statement 
holds true of the City of New Orleans, where there is a stock of 
nearly 500,000 bales. To say, therefore, that a class of men who 
absorb, provide for and take care of this amount of property are 
an injury to the producers, would seem to be too absurd to be seri- 
ously considered for one moment. 




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WAREHOUSE RECEIPT FOR COTTON STORED IN SOUTH BROOKLYN, N. Y. 

(By permission of Ware & Leland, Chicago.) 

Some of the advocates of the destruction of this system avow 
that their only purpose is to stop '' short selling," apparently over- 
looking the fact that there are always two parties to a transaction, 
the resisting force of the one being quite as great as the other, so 
that the influence exerted by '' short selling " is little or nothing. 

The great law of supply and demand regulates values of every- 
thing and is no more to be resisted than the tides of the ocean. A 
short seller in making his engagements will either derive profit or 
suffer loss as the ultimate facts prove him to be right or wrong. If 
there is more of any article than the world needs for the time being, 
the price will decline. If there is less than the world needs, the 
price will advance and no legislation under heaven will prevent 
this inexorable law from operating whether a man sells what he 
does not possess in the hope of securing it at a later period at a less 



430 GOLD BRICKS OF SPECULATION 

price or not. This being so, to abolish the system would be of no 
advantage to those who falsely imagine that it might be, but on the 
contrary, would tend to leave them at the mercy of buyers for 
actual consumption only, and at a time when their stocks and sup- 
plies are the greatest. The further effect would be, that fluctua- 
tions in the value of all of these articles would be much more 
violent than is now the case, which assertion finds corroboration 
in the statistics of years when the system of trading for future 
delivery was not in existence. At that time, it was no unusual 
thing for cotton to fluctuate ten cents per pound within a crop year, 
whereas now it rarely exceeds two or three cents' per pound. 

There might be some force in an argument, that a small portion 
of the community were engaged in a business that resulted in severe 
damage to another, and by far larger portion of the community, if 
it were true. But it is not true. Any reasonable man must concede 
that supply and demand regulate values, and that individual effort 
against this great law means destruction to the individual. 

It acts and is used as an insurance against loss to a very large 
extent. The common method pursued by exporters in the early 
part of the season is to enter into engagements with England and 
the continent for the delivery there of very large quantities of cot- 
ton, the price of which is fixed, based upon the rate at which they 
can contract for cotton in New York, plus charges for freight, 
commissions, etc. When the crop begins to move, these exporters, 
who have practically no interest other than to secure the requisite 
quantity and quality of cotton that they have sold, having bought 
and sold the same quantity, begin buying in the South such grades 
or qualities of cotton as they require, and as they buy in the South, 
they make a sale contract in New York corresponding in all respects 
to the previously executed purchase contract; the result is they 
have fulfilled their obligation to Europe made months before, with- 
out any of the risk of either an advance or decline in the price 
between the time of contracting with Europe in the Summer and 
Fall, and the making of the shipment in the later Fall or Winter. 

Large quantities of cotton are also bought by Liverpool mer- 
chants and stored in Liverpool, with contract sales against such pur- 
chases, in the same manner as is done in New York and New 
Orleans. The fact that the cotton is already sold and is therefore 
not subject to the risks of markets lends security to bankers in the 
handling of bills of foreign exchange drawn against shipments. A 
bill of exchange drawn upon a merchant in Liverpool for a cargo 
of cotton that has already been sold is a very much safer bill of 



EXCHAXGES IX THEIR OWX DEFEXSE 431 

exchange to buy than one drawn against a shipment of cotton 
against which there has been no sale, the market value of which 
upon its arrival may be materially lower than at the time of its 
purchase. 

Again, manufacturers in this country are continually making 
contracts for the delivery of goods sometimes extending over a 
period of months or even a whole year. Contracts for future 
delivery of cotton are made use of to a great extent by them to 
insure the requisite amount of raw material at a fixed price to carry 
out the contracts entered into for goods. 

Again, country merchants in the South furnish to planters sup- 
plies of meat, corn, provisions and fertilizers, upon an agreement 
that they shall be paid therefor in a stipulated number of pounds of 
cotton per pound of meat or ton of fertilizer when their cotton 
crop is made. These merchants, to no small extent, make use of 
contracts for future delivery of cotton for the disposal of the cotton 
which will come into their hands in payment of the supplies they 
have furnished, and, knowing just how many pounds they are to 
receive and at the same time having made a contract for its sale, 
they thereby fix the profit they are to make on the fertilizers and 
provisions they have so supplied to the planters. 

It will therefore be seen that the legitimate uses to which this 
system of trading is put are of wide ramifications and of great 
benefit, that it is a system of business, so interwoven with the com- 
merce of the country and the world, that to abolish it would be the 
doing away with one of the most sensible and reasonable evolutions 
of modern trade. 

Another important feature for your consideration is the fact that 
this method of trading is not confined to this country, but is in 
operation in all the great mercantile countries of the world. ^ * * 



Extracts from Protest of the Xew Orleans Cotton Exchange Against 

the Passage of ''Anti-Option" Bills, i8p2: 

The system of dealing in contracts for the future delivery of 
cotton was inaugurated in New York in 1871, in New Orleans 
in 1879, and in Liverpool somewhere about the same time. If 
stability of value is a desideratum, we claim that it has been more 
nearlv obtained under the modern than under the older method. 
It is beyond question that since the inauguration of this system 
the fluctuations in the price of cotton have been less violent than 



432 GOLD BRICKS OF SPECULATION 

they were under the old regime. '"' "^ '^ When we consider the 
enormous crop of the preceding season, one which choked up all 
outlets, it is a matter of surprise that the price has not fallen lower 
than it has. Indeed, why not to the low prices, as shown above, 
when the crops were comparatively trifling. During the month of 
October of the present season fully one-quarter of the entire crop, 
say 2,500,000 bales, worth $100,000,000, left producers' hands, 
and it is quite evident that if this vast amount of cotton had been 
forced to find as purchasers the spinners in Europe and America 
alone, without relief from the merchants who operate through for- 
ward deliveries, the price at which it would have been sold would 
have brought disaster to the entire South. As a matter of fact, 
middling brought in New Orleans an average of over 8 cents during 
the October in question, while during the first half of January, with 
probably only twenty-five per cent of the crop left to come to market, 
the price has ruled under 7 cents. As it was, the merchant and 
speculator who had sold short stood in the breach and saved the 
country from ruin, as they came in as buyers to cover the sales they 
had made during the spring and summer months. We think that 
the only solution of the question is that the sustaining influence of 
the sales for forward delivery prevented a more serious decline than 
actually took place. ^ ^^ ^ This committee is of the opinion 
that the great determining elements of price are supply and demand, 
and that price can neither be pcnuanently lowered nor advanced by 
dealings in contracts for forward delivery. That the future market 
is simply a great mirror reflecting the general situation from moment 
to moment. 

Cotton is an article produced largely in excess of the consuming 
power of the United States, and while the demand for home con- 
sumption is an important factor in regulating price, it cannot be 
denied that the great European markets exercise the chief control 
in this regard. Unlike wheat and corn, the largest part of the cotton 
crop is marketed abroad. Of wheat about 25 per cent is exported, 
of corn from 3 to 4 per cent, while of cotton 70 per cent is sent to 
foreign markets ; and this amount is onlv limited to this figure be- 
cause, after the American mills have taken their supplies, there re- 
mains but 70 per cent to export. That a greater amount does not 
go abroad is simply due to the fact that we have not the cotton to 
send away. Considering, then, the vast amount of the cotton crop 
that is exported, the influence of Europe in determining price must 
be at once apparent. Therefore, as Europe is the great regulator 
of the price of cotton, this committee cannot see how the operations 



EXCHANGES IN THEIR OWN DEFENSE 433 

of the " future " markets in America can depress the price below the 
vakie placed on it abroad ; and for the simple reason that, as soon as 
the price on this side sinks below the value in Europe, it will at once 
be taken up for export, and the equilibrium be re-established. 

Of recent years the custom has grown up among spinners of cot- 
ton yarn and manufacturers of cotton cloth to sell their product 
ahead, thus securing a price for the product of their spindles and 
looms. Inasmuch as the margin of profit in converting the raw 
material into the manufactured article is at best but narrow, the 
consumers of raw cotton aim to cover their sales of yarn and cloth 
by a simultaneous purchase of the cotton that will be needed in their 
work. Practically, this can only be accomplished by contracting for 
the forward delivery of needed supplies ; and this by reason of the 
fact that the capital of most concerns is tied up in the plant, in the 
greater or less stock of goods that has always to be carried, and in 
the credits that have to be extended to their customers for goods 
sold on time. It is quite out of the question that beyond a few of 
the large corporations in the United States, France, and occasionally 
England and Germany, any very large stock of cotton can be bought 
and paid for in cash ; hence without markets for forward delivery 
these purchases could not be made. 

It has been suggested that the planter might sell directly to the 
spinner, but, apart from the impracticability of bringing the vast 
number of producers into direct communication with the compara- 
tively small number of consumers, we are brought face to face with 
the insuperable obstacle that spinners require specific qualities of cot- 
ton, and these cannot be bought direct from planters. A quality 
that might suit one mill would be utterly useless in another. No 
planter could safely undertake to sell, for forward delivery, a given 
grade or a given length and strength of fibre, or staple, as it is tech- 
nically known to the trade, because in the event of a wet and stormy 
gathering season, the grade for his cotton would be very much lower 
than would be the case should the picking season be dry and gen- 
erally propitious ; while should the growing period be one of 
drought, the fibre would turn out to be much inferior to what it 
would be should the plant have reached maturity after having 
enjoyed that amount of moisture necessary to its proper develop- 
ment. Thus quality and staple cannot be foreseen. Moreover, in 
estimating the quantity that a planter can sell for forward delivery, 
we must consider, in addition to all the various influences that effect 
the early growth of the crop, the effect of the ravages of worms 
and of early frosts in the latter stages, as a crop that promised a 



434 GOLD BRICKS OF SPECULATION 

given result in July or August, might easily be curtailed 25 per 
cent by unfavorable conditions before the end of the picking. Thus 
the planter cannot closely calculate how much he can sell for forward 
delivery. Viewing, then, the questions of quality, staple, and quan- 
tity, not to speak of the impossibility of bringing producer and con- 
sumer directly together, it seems quite clear that the idea that the 
spinner can contract for forward delivery directly with the planter 
must be abandoned. 

It is the opinion of this Committee that between the month of 
May and the month of August, both inclusive, European consumers 
contract with merchants who make a business of handling the cotton 
crop, for the shipment during the Autumn and early Winter months, 
of 1,500,000 bales, or say about 20 per cent of the crop. During 
the same period the mills of the United States enter into similar 
contracts, and for important quantities. 

The merchants who make these contracts for forward shipment 
or delivery enter into them with no view of speculation. On the 
contrary, in order to eliminate all element of speculation from the 
transaction they purchase as nearly simultaneously as possible a 
corresponding quantity in the forward delivery markets in New 
Orleans or New York. It may be objected that the contracts dealt 
in do not specify any given grade. This is admitted, but the experi- 
ence of many years has demonstrated that there is constantly a close 
sympathy between the price of the actual cotton on any given day, 
and the price of contracts for corresponding month on the same day. 
So close is the relation between the two that no merchant, however 
prudent, hesitates to use the market for contracts as an insurance 
for his sales of cotton of a specific quality and staple. Under the 
operations of this bill, merchants would be, to a great extent, 
debarred from entering into these contracts with spinners ; hence, 
when the crop is rushed to market in the Autumn, the market would 
miss the sustaining influence of these sales for forward delivery, 
and under the pressure of heavy receipts, prices sink lower than all 
the surrounding circumstances would justify. 

It has been stated above, that while the great European markets 
are the most potent factors in determining prices, that the wants of 
the American mills are also an influence in the same direction. 
More than this, the views of planters, merchants and others, as 
reflected in the markets for forward delivery in New Orleans and 
New York, have also great weight. 

When it is shown, as appears by the records of past years, that 
cotton producers market 75 per cent of their crops between Sep- 



EXCHANGES IN THEIR OWN DEFENSE 435 

tembcr i and January i, the possibility of the calamity likely to 
ensue in the coming Autumn, when the great bulk of the cotton crop 
is being rushed into market, upon the breaking down of the ma- 
chinery that handles the crop, a condition which will certainly result 
from the enactment of the prohibitive features of this bill, should 
call for the most serious consideration at the hands of Congress. 
It is quite within the range of probability, the sustaining influ- 
ence of forward delivery sales being removed, that a level of prices 
may be reached during that period lower than has been witnessed 
for years. And it must be remembered that during that period 
75 per cent of the cotton crop of the United States is forced on 
the market. * * * 



Extract from the Address of Mr. Michael CudaJiy, of the Cudahy 

Packing Company of Chicago and Omaha, before the Senate 

Committee, protesting against ''Anti-Option" Bills: 

Mr. Cudahy said his business was that of a pork packer and a 

general dealer in provisions. The rules of the board governing 

purchase and sale of provisions have always been carried out 

strictly by the trade, and that has always led to a feeling of security 

in contracts made on the board for provisions. He considered that 

the Board of Trade markets have been the means of keeping steady 

regular prices and preventing undue depression on the price of hogs, 

adding in the following words : 

For the reason that there are two seasons of the year, one 
beginning about November i and ending about February i, the other 
beginning about May 15 and ending about Jidy 15, in which accumu- 
lations of product take place, and that, by reason of having a market 
where you find men wdio are willing to take the risk of owning the 
property with the packer, it gives the packer a kind of insurance or 
security so that he can operate his plant to its full capacity and 
purchase hogs as fast as they come into the market. Were it not 
for the Board of Trade the packers would be obliged to take the 
entire hazard of carrying accumulations themselves, and, as a matter 
of course, w^ould be more timid in their operations and less inclined 
to operate alone, unless at a low price. 

As far back as twenty years ago there was not so much trade 
in " futures " by the public as at present, and the packers' season was 
only four months in the year, beginning November i and running to 
the end of February. They w^ere obliged to slaughter and pack a 
sufficient amount in that time to last for the twelve months. It 



436 



GOLD BRICKS OF SPECULATION 



was at that time an almost sure thing to put the property in the 
cellar, taking the hogs from the farmer at a low price and charge 
the consumer a high price for it during the Summer months. Then 
followed the introduction of slaughtering and packing throughout 
the entire year, and it was not until about fifteen years ago that the 
Summer product was recognized by the Board of Trade as being 
standard and merchantable, and, although the products for three 
months previous were quite as good as the Winter packed, they could 
not obtain within a cent a pound of the price of the Winter packed 
goods. The Board of Trade is a good medium of exchange. 



J/:^../lo3 




No. 369- - 

ji%^Cl^ilt^ll on Storage in,_M^:^xX, 

, " OvOT Hundred and Flftu Tierces Prime Steam Lard. 

- ' ^ ij Brand CL^Oyi^ "t^Ae C^:Z 



r^onH>iJ^^..^_. 



_ Mark,. 



Subject U) the order hereon ^£_ *J^..^./jXA^^<S^d^..^ Z. ,5w-i^^.'^_.'£^ _, the surrender 

of this^Speipt properly endorsed, and payment of ibnarges. Loss by fire, leakage, shrinkage 
or da^ffia^*^ perishable property, at owner's risk. 

part thereof.. 



Storage thi-ee and one-half (3^) cents per tierce for te 



STORHQE five DAYS FROM 




WAREHOUSE RECEIPT FOR 25O TIERCES PRIME STEAM LARD, STORED IN 
UNION STOCK YARDS, CHICAGO. 

(All provisions are stored in provision warehouses. The receipts are deliv- 
erable on contracts made on Board of Trade and are negotiable.) 

(By permission of Hately Brothers, Chicago.) 

For instance, his firm might sell to a foreign country 10,000 
boxes of bacon — they might not have any in their cellars at the 
time, but he could go to the Board of Trade and purchase the equiva- 
lent thereof for certain months that correspond with the months 
for which they had sold. Thus they are protected, and when the 
hogs come the packers stand ready to take them without any hazard 
to themselves, and consequently will work on a closer margin. 
The Washburn bill would make this impossible. There are two 



EXCHANGES IN THEIR OWN DEFENSE 437 

seasons of the year in which the packers accumulate a surplus. 
If there was only a continuous supply — just enough to supply the 
demand from day to day — a regular and uniform price might easily 
be obtained. 

There is to-day in the West 500,000,000 pounds of hog product 
that is to be carried. Interest, insurance, and the cost of caring 
for the same must be borne, and uncertainties of the market con- 
sidered. Now\, if the packers had no outside relief from this hazard, 
they would naturally want to put this product in their cellars at a 
low price and would expect to realize a handsome profit for carry- 
ing it over into the season when these heavy stocks would be taken 
up by the trade. As it is now the speculators from all parts of the 
world have the right open to them to buy " futures," and the packer 
has thereby the means of protecting himself, and is thus enabled to 
pay a better price for hogs, and is also enabled to compete closer 
with his neighbor, even though he may not have such a large capital. 
For myself and my company I am perfectly indifferent, from a 
financial standpoint, whether the bill is passed or not, but I will give 
you notice right here that, for the six months of the year when 
75 per cent of the hogs are marketed, the price paid for hogs will 
be much lower relatively than it is now, by reason of the greater 
hazard that the packers must take in carrying the surplus. 



4:38 GOLD BRICKS OF SPECULATION 



CHAPTER VIII. 

MARKET quotations; THEIR USES AND AJ5USES. 

History of market quotations ; how used by legitimate brokers ; 
birth of the bucketshop ; efforts to prevent bucketshops ac- 
quiring quotations ; review of the Central Stock and Grain 
Exchange case ; quotations are the life of the bucketshop ; manu- 
facturing quotations ; Skakel's '' tape game " ; counterfeiting 
the quotations of the Chicago Board of Trade and Minneapolis 
Chamber of Commerce. 

The telegraphic transmission of the quotations of prices 
or variations in values, as shown hy purchases and sales, 
bids for and offers of stocks, bonds and farm products, on 
the great Exchanges of the United States, has, within the 
past thirty years, become a source of immense revenue to 
telegraph companies. The demand for prompt, accurate 
and continuous communication of such quotations has en- 
couraged ingenious persons to produce almost perfect elec- 
trical devices known as '' tickers," or, more properly speak- 
ing, telegraphic printing instruments, which record on a 
paper tape the prices, news and gossip which persons in- 
terested in the markets for such articles wish to ascertain. 

The instantaneous publication, by means of the 
'' ticker," of the market reports was first adopted in 1867, 
when a rather crude instrument was used in New York 
to record the quotations of the Stock Exchange. The evo- 
lution of the " ticker " has been rapid and its use in trans- 
mitting quotations, gossip, statistics, and news of current 
events has become general by reason of its accuracy and 
economy. While the '' ticker " might be operated success- 
fully on a long circuit, the fact that it requires two wires is 



MARKET QUOTATIOXS—USES AXD ABUSES 439 

prohibitive from the standpoint of earnings; hence the 
service is confined to short circuits, the service in each city 
being from a local plant. 

The operator sending out quotations, etc., over a 
*' ticker " circuit has much the same duties as a typewriter 
operator. He must be a telegraph operator if he sends a 
continuous line of quotations. But gossip and statistics 
being sent from copy, it requires only expertness in operat- 
ing the keyboard of the transmitter, which is very similar 
to the keyboard of a typewriter. 

In transmitting over a " ticker " system the continuous 
quotations of an Exchange such as the New York Stock 
Exchange or the Chicago Board of Trade, the operator 
receives the quotations by sound, and immediately repeats 
them on the '' ticker " transmitter, just as though he were 
writing a dispatch on a typewriter. Instantaneously the 
letters and figures are reproduced on the tapes of all the 
'' tickers " on the circuit. 

During the market hours of the Exchange the volume 
of business is such that there is constant trading and 
conseqtient variations in prices. Each variation is re- 
corded by a reporter, usually an employe of the Exchange, 
who instantly sends it by messenger to a telegraph operator 
located conveniently in the Exchange room. The operator 
immediately notes the time of the quotation and " puts it 
on the wire '' by the ordinary system of telegraphy. By the 
single act of the operator in the Exchange the quotation 
is flashed to all parts of the country, it being repeated atito- 
matically from his key to the larger cities of the United 
States where there is a demand for the information. The 
" ticker " operator receives the quotations from a 
" sounder," which is attached to the wire carrying the 
quotations from the Exchange. As he must record them 



440 GOLD BRICKS OF SPECULATION 

on the key-board as fast as they come in over the '' sound- 
er," the time intervening between the making of a transac- 
tion on an Exchange, at a price varying from the previous 
transaction in the same commodity or stock, and the ap- 
pearance of the quotation on the '' ticker " tape is usually 
only a few seconds — seldom exceeding thirty seconds. 

The New^ York Stock Exchange quotations are flashed 
to Chicago, and the Chicago Board of Trade quotations to 
New York by the operators in the Exchange Halls, so that 
the quotations of either Exchange appear on the '' ticker " 
tapes simultaneously in both cities. 

Quotations sent out as above described, from the open- 
ing to the close of the Excliange each day, and covering 
practically every variation in price, are known as " Con- 
tinuous Quotations/' 

The New^ York Stock Exchange and Chicago Board of 
Trade quotations are distributed more generally than those 
of other Exchanges, but all stock, cotton and grain Ex- 
changes have similar distribution of their quotations within 
a smaller radius, their markets being less national in char- 
acter. 

The economy of the '' ticker " service adds to its popu- 
larity and has brought it into general use. In Chicago a 
" ticker," by means of which the continuous quotations of 
the Chicago Board of Trade can be received, is furnished 
for $4 a week, wdiile $io a week is the highest charge for 
'' ticker " service at any of the market centers. 

Late in the '70s '' tickers " had approached a moderate 
degree of perfection. Brokers and commission merchants 
used them as a matter of economy and for the purpose of 
keeping such clients as frequented their offices informed 
as to the course of the market. Subsequently blackboards 
were used upon which each quotation was written as it 



MARKET QUOTATIONS— USES AND ABUSES 441 

appeared upon the tape. Thus the changes in the various 
markets were posted as fast as they occurred each day, 
for the information of members, employes and customers. 

From this custom of the legitimate commission mer- 
chants and brokers, of receiving and posting the quotations 
as a matter of information and for facilitating business, 
was born the " bucketshop," which within five years after 
its inception became the national form of gambling. 

Procuring a blackboard, a " ticker," a few^ chairs and a 
sheet of paper, the bucketshop-keeper invites the public to 
his office for the purpose of betting with him as to the 
future prices that may appear on the '' ticker " tape. He 
records the bets on a sheet of paper, and as they are won 
and lost draws his pencil through them. He acts as stake- 
holder and exacts from 21/2% to 25% commissions. The 
player has no chance and the prudent bucketshop-keeper 
becomes rich. Like all games of chance, the popularity of 
the bucketshop has increased in ratio to the percentage 
against the '' sucker " who plays the game. 

This is all there is to a bucketshop, no matter how art- 
fully it may be disguised or how elaborate its machinery 
may appear. More modern methods are adopted only to 
facilitate the " skinning " of the '' sucker." 

The Exchanges and the Telegraph Companies. 

The quotations of the Exchanges w^ere first gathered 
and sent broadcast by the telegraph companies as news 
items, interspersed wath other news and gossip. But as 
the volume of business on the Exchanges increased it 
became necessary to separate and classify the quotations, 
so that for some tw^enty years past certain wires and '' tick- 
ers " have been devoted exclusively to the transmission of 
the quotations of each particular Exchange. 



442 GOLD BRICKS OF SPECULATION 

The demand for quotations, particularly of the New 
York Stock Exchange and Chicago Board of Trade, for 
use in bucketshops, was heavy and became an enormous 
revenue producer for the telegraph companies. At length 
the Exchanges awoke to the situation and protested 
against their quotations being used as a basis for bets. But 
the damage had been done. The telegraph companies in- 
sisted upon it, that they had the right to supply quotations 
indiscriminately, thereby fostering the bucketshop evil, 
regardless of its depressing effect upon prices and its 
unwholesome moral effect upon the nation. 

For years the question of the indiscriminate distribu- 
tion of quotations by the telegraph companies to bucket- 
shops has been in contention l3etween the Exchanges and 
the telegraph companies, and it was not until 1900 that 
drastic measures adopted by the Chicago Board of Trade 
promised a solution of the problem. The position of the 
\\^estern Union Telegraph Company was assailed by 
William T. Baker, five times president of the Chicago 
Board of Trade, in his inaugural address delivered in 
January, 1897. He used the following forceful language: 

'' * '^ * Bucketshops and poolrooms are twin outlaws in 
nearly every state in the union. Their united corruption fund has 
enabled them to bafi^e justice by debauchery of the constituted 
authority for the investigation and prosecution of crime, but they 
could not continue in existence a day but for their alliance with 
the Western Union Telegraph Company. That company furnishes 
all the machinery and all the new\s on which bets are laid, and it is 
the only telegraph company in the United States that leases wnres 
for the private use of bucketshops in swindling their patrons. The 
spectacle of a corporation whh a hundred million dollars capital 
paving dividends gleaned from the vice and crime of the country 
is one to make any American blush." 

After years of expensive but rather desultory effort on 
the part of the Chicago Board of Trade to eradicate bucket- 



MARKET QUOTATIOXS—USES AND ABUSES 443 

shops, it finally, in 1900, adopted the policy of controlling 
absolutely the distribution of its (juotations. There fol- 
lowed negotiations covering almost a year, during eight 
months of which the Western Union Telegraph Company 
was entirely deprived of the right to distribute the quota- 
tions — when finally, on April 15, 1901, the telegraph com- 
panies signed a contract with the Board, which, in addi- 
tion to stipulating that the telegraph companies should pay 
a large sum to the Board annually for the privilege of re- 
ceiving and distributing the quotations, also provided that 
every application for the continuous quotations should be 
submitted to the Board for approval, and only such per- 
sons, firms and corporations as were not doing a bucket- 
shop business, and had been favorably passed upon by the 
Board, should receive the quotations. 

With the exception of one prominent Chicago bucket- 
shop, which had procured an injunction, no bucket shop in 
the country has, since July 31, 1900, been receiving directly 
from the telegraph companies the quotations of the Chicago 
Board of Trade. Several of the larger bucketshops have 
purloined the quotations in various ways, but the able coun- 
sel of the Board, Mr. Henry S. Robbins, has successfully 
attacked them in the Federal Courts, and gradually these 
pirates of speculation are being enjoined from using or 
in any way acquiring the quotations of the Board of Trade. 
The following is a copy of one injunctional order issued 
December 15, 1902, against forty persons in the Southern 
District of Illinois : 

IN THE CIRCUIT COURT OF THE UNITED STATES 

FOR THE SOUTHERN DISTRICT OF ILLINOIS, 

THE UNITED STATES OF AMERICA. 

To the R. V. Cleage, A. E. Babcock, J. R. Lochridge, Charles O. 
Jones, William R. Lochridge, Chas. W. Shade, Roy Haddocks, 



444 GOLD BRICKS OF SPECULATION 

James F. Cooley, Colby Harry Knapp, Samuel L. Weaver, John 
L. Keister, Peter Chase, Benjamin Z. Taylor, John L. 
SchroU, Frank Dorwin, James L. Stafford, Samuel Durbm, 

Earl Rundell, John Richards, Louis McMillan, McBride, 

William D. Mathers, Oscar Weisenberg, J. A. Joel, Robert A. 
Groch, Wm. C. Applegate, R. J. Hammond, Xerxes Wallace, 
C. F. South, H. S. Beem, P. B. Hostrawser, Thomas A. Gasso- 
way, James Moxam, George T. Ray, C. H. Marshal, Ezra A. 
Staninger, Andrew J. Mundy, H. A. Mundy, Eugene Adler and 
A. H. Curtis, Greeting : 

Whereas it hath been represented to the Judges of our Circuit 
Court of the United States for the Southern District of Illinois in 
Chancery sitting on the part of the Postal Telegraph-Cable Com- 
pany, Western Union Telegraph Company, Cleveland Telegraph 
Company and Chicago and JMilwaukee Telegraph Company, com- 
plainants in a certain bill of complaint exhibited in our Circuit Court 
on the Chancery side thereof, before the Judges of said Court, 
against you the said R. \\ Cleage, A. E. Babcock, J. R. Lochridge, 
Charles O. Jones, William R. Lochridge, Chas. W. Shade, Roy 
Maddocks, James F. Cooley, Colby Harry Knapp, Samuel L. 
Weaver, John L. Keister, Peter Chase, Benjamin Z. Taylor, John 
L. Schroll, Frank Dorwin, James K. Stafford, Samuel Durbin, 

Earl Rundell, John Richards, Louis McAIillan, McBride, 

William D. Mathers, Oscar Weisenberg, J. A. Joel, Robert A. 
Groch, \\'illiam C. Applegate, R. J. Hammond, Xerxes Wallace, 
C. F. South, H. S. Beem, P. B. Hostrawser, Thomas A. Gassoway, 
James Moxam, George T. Ray, C. H. Marshall, Ezra E. Staninger, 
Andrew J. INIundy, H. A. Mundy, Eugene Adler and A. H. Curtis, 
to be relieved touching the matters complained of and it is ordered 
that a writ of injunction issue out of said court in accordance with 
the prayer of said Bill of Complaint enjoining you and each of 
you from obtaining, receiving, selling or distributing the market 
quotations of the Board of Trade, of the City of Chicago and from 
aiding, abetting or assisting others in the taking, selling or distribut- 
ing said quotations as described in the Bill of Complaint herein until 
this Honorable Court in Chancery sitting shall make further orders 
to the contrary. 

Hereof fail not under penalty of what the law directs. 
To the Marshal of the Southern District of Illinois to execute. 
Witness the Hon. Melville W. Fuller. Chief Justice of the Su- 
preme Court of the United States of America at Springfield in said 
District this 15th day of December, in the year of our Lord nineteen 







^ u 






P £ 

b d 

O K 

2; g 



MARKET QVOTATIOXS— USES AND ABUSES 445 

hundred and two, and of our Independence the one hundred and 
twenty-seventh year. 

(SEAL) (Signed) James T. Jones, Clerkv 



''Quotations are the Life of the Bucketshop.'* 

The one Chicago bucketshop that continued to receive 
the quotations after July 31, 1900, under an injunctional 
order, succeeded in preventing the discontinuance of the 
service until December, 1901, when it was finally defeated 
by the Appellate Court of Illinois, which reversed the 
order of the lower court. The bucketshop immediately 
moved to Hammond, Indiana, and, making a slight change 
in its name, proceeded to acquire the quotations of the 
Chicago -Board of Trade surreptitiously. 

When attacked in the Federal Court in December, 
1902, the name was again changed, in order to escape the 
results of the injunctional order issued by that court. So 
that within thirteen months this bucketshop, which is one 
of the most notorious in the West, did business under the 
following names : 

CENTRAL STOCK AND GRAIN EXCHANGE OF 

CHICAGO. 

(Incorporated in Illinois.) 
CENTRAL GRAIN AND STOCK EXCHANGE OF 
HAMMOND, INDIANA. 

(Incorporated in Delaware.) 
HAMMOND ELEVATOR COMPANY OF HAM- 
MOND, INDIANA. 

(Incorporated in Delaware.) 
In order to demonstrate to the reader the absolute 
necessity of continuous and official quotations to a bucket- 
shop, I shall give a synopsis of the Illinois Appellate Court's 
statement and opinion in the case, wherein it reversed the 



446 GOLD BRICKS OF SPECULATIOiV 

order of the lower court, which had granted an injunction 
preventing the Board of Trade from withdrawing the quo- 
tations from this notorious bucketshop. 

It will be noticed that the bucketshop pleads "" That the 
successful management of the business of tJie Central 
Stock and Grain Exchange depends entirely upon receiv- 
ing instantaneously and continuously the said market re- 
ports." 

STATEMENT OF CASE. 
{Abstract of Appellate Court's Statement.) 

July 28, 1900, THE CENTRAL STOCK AND GRAIN EX- 
CHANGE filed a bill against the Board of Trade of the City of 
Chicago and the Western Union Telegraph Company, alleging that 
it was an Illinois corporation, engaged in the business of dealing 
in grain, provisions, produce and other commodities in the City of 
Chicago ; that the Western Union Telegraph Company, which, by 
arrangement with the Board of Trade, transmitted to third persons 
the market quotations of the board, had, by the request of the C. S. 
& G. Ex., so strung its wires as to connect them with its place of 
business in the City of Chicago, and there attached to them instru- 
ments placed there by the telegraph company ; and, by means 
thereof, communicated with the C. S. & G. Ex. and delivered to it 
said market quotations ; that said market quotations are affected 
with a public interest, AND THAT THE SUCCESSFUL MAN- 
AGEMENT OF THE BUSINESS OF THE C. S. & G. EX. 
depends entirely upon receiving INSTANTANEOUSLY and 
CONTINUOUSLY the said market reports. The bill averred that 
the Board of Trade had threatened to prevent the market reports 
from being transmitted to the C. S. & G. Ex., and to withhold from 
the telegraph company information as to the market quotations. 
The bill charged that it was the intention of the telegraph company, 
at the instigation of the Board of Trade, to cut off and disconnect 
its wires communicating with the place of business of the C. S. & 
G. Ex., and to remove therefrom the instruments and means of 
obtaining the market quotations. 

On the filing of the bill an injunction was issued, as prayed in 
the bill. 

July 31, 1900, the Board of Trade answered, averring among 



MARKET QUOTATIOXS—USES AND ABUSES 447 

other things that the C. S. & G. Ex. was engaged in conducting a 
bucketshop, in whicli it made with its customers certain pretended 
contracts respecting the purchase and sale for future dehvery of 
grain and provisions, and that said pretended contracts or trades 
were in reahty but bets upon the market prices, and that THE SAID 
AIARKET QUOTATIONS WERE NECESSARY TO EN- 
ABLE THE C. S. & G. EX. TO CONDUCT ITS BUSINESS. 
The answer further averred that by reason of the giving of the 
market quotations to bucketshcps by the telegraph companies, the 
Board of Trade adopted, June 25, 1900, certain regulations concern- 
ing the distribution of the quotations, which were put in the form 
of a contract, which contract was submitted to the telegraph com- 
panies, including the Western Union Telegraph Company, with a 
notice that, in order to receive the quotations, they must sign the 
same before August ist; that the Western Union Telegraph Com- 
pany declined to sign such contract, but the Cleveland Telegraph 
Company had signed it. Attached to the answer was the contract 
referred to between the Board and the Cleveland Telegraph Com- 
pany. The contract provided that the Board would furnish the 
market quotations to the telegraph com.pany, and the company agrees 
in part as follows : 

" Said Telegraph Company agrees that it will not knowingly 
furnish or sell, directly or indirectly, said quotations or other news 
to any person, firm or corporation conducting a bucketshop or other 
similar place where such quotations are used as a basis for bets or 
other illegal contracts based upon the fluctuations of the price of 
commodities dealt in on said Board of Trade, etc., etc." 

Within a few days the Cleveland Telegraph Company was sub- 
stituted in the suit for the Western Union Telegraph Company, the 
latter company having withdrawn from the business of distributing 
the quotations of the Board of Trade. 

The cause was heard before the chancellor on the testimony of 
witnesses and other evidence given and produced in open court. 
The court found, among other things, that the defendants had not, 
nor had any of them, any right to discriminate between persons and 
corporations engaged in business, and who are ready to pay for the 
market quotations and to conform to all reasonable regulations as 
to the collection and transmission thereof. The temporary injunc- 
tion was made perpetual by the decree and the relief prayed was 
granted. 

Note. — This decree of the lower court was reversed by the 
Appellate Court and the injunction dissolved. The opinion written 



448 GOLD BRICKS OF SPECULATION 

by Judge Adams is instructive and gives the reader a clear idea of 
what a bucketshop is. 

EXTRACTS FROAI THE OPINION OF THE APPELLATE 

COURT. REVERSING THE LOWER COURT. 

(ADAMS, JUSTICE.) 

The sole defense set up in the answers is, that the C. S. & G. 
Ex. IS engaged in conducting a bucketshop ;' in other words, that 
its business is such as is prohibited by : " An Act to suppress bucket- 
shops and gambling in stocks, bonds, petroleum, cotton, grain, pro- 
visions and other produce." 

The evidence for the Board of Trade on whom the court held 
the burden of proof rested, was mainly directed to proving that 
the C. S. & G. Ex. kept a bucketshop within the meaning of the 
statute; that the dealing at its place of business was solely on the 
market quotations of the Chicago Board of Trade, and that it know- 
ingly permitted the pretended buying and selling by its customers 
of grain, with reference to such market quotations, and without any 
intention of receiving or delivering the grain ostensibly bought or 
sold. The C. S. & G. Ex's evidence was mainly directed to proving 
that a large part of the business of the Board of Trade of the City 
of Chicago was similar to that of the C. S. & G. Ex. 

The C. S. & G. Ex. did a very large business. It had corre- 
spondents in places outside of Chicago, who acted as brokers, for 
commission, in buying and selling grain, and who sent their orders 
to it in Chicago ; and the evidence shows that it, although purport- 
ing to act as principal in the deals, shares in the commission of its 
correspondents. Elmer Southard, a clerk of the C. S. & G. Ex., 
who had been in its employ two years, and whose business it was 
to keep books in which were recorded the trades made with it, tes- 
tified that he took from the telegrams conveying an order received 
from a correspondent the number of the trade, the name of the cus- 
tomer, the quantity, the kind of commodity dealt in, and the price, 
which, when the telegram reached the witness, was marked on it in 
blue pencil, and he entered in his book the number of the trade, the 
price and the price to which the margin would carry it, which was 
practically all. Illustrating, the witness testified : 

" When, for instance, a telegram came opening a trade, if it is 
bought at 75, we will show it margined to 74>^ ; that is the mar- 
ginal price ; it is generally one cent to all our customers." 

The evidence shows that the deal was closed in such case as 
that stated at 745^ instead of 74, because Ys was reserved from the 



MARKET QUOTATIONS— USES AND ABUSES 449 

margin as the commission of the correspondent or broker who sent 
the order. The witness also testified that if an order was to buy 
i,ooo wheat at 75, with a stop at 74, if the market should close one 
day at 74^ and open the next at 73, the trade would be closed at 74. 

W. E. Fildes testified that he had been a correspondent of the 
C. S. & G. Ex. at different places, for five years, the last place being 
Bloomington, Illinois. He testified substantially as follows: 

'* At my office in Bloomington there was a telegraph instrument, 
a blackboard and chairs and a desk or two. The office was upon 
one of the private wires running to the office of the C. S. & G. Ex. 
at Chicago, under an arrangement between myself and it. Between 
the hours of nine in the morning and two in the afternoon, the 
market quotations of the Chicaeo Board of Trade and the New 
York Stock Exchange came over that ware and were posted on the 
blackboards when they came in. There were persons sitting on the 
chairs wdiere they could see the blackboard. These people would 
give orders to buy and sell grain or stocks, as the case might be. 
In stocks from ten shares upward and in grain from 1,000 bushels 
upward. These customers in placing orders made deposits of 
money — nothing less than one cent and upw^ards on grain — one cent 
a bushel — that was usually the first amount of money that was paid 
as margins, which w^ould be $10 on 1,000 bushels of grain and $10 
on ten shares of stock. I would then send the order to the C. S. 
& G. Ex. over this wire and the money would follow later by Vvdiat 
is called a bank wire. All orders would be telegraphed in over this 
wire. The orders would read buy or sell the number of thousand 
bushels and the price, if stipulated, and otherwise it would be sup- 
posed to be the market price, and margin i, or some of them would 
read margin 2. This would mean that that was all the money that 
was risked on the transactions, or supposed to be lost. On 1,000 
bushels of grain M. i would mean $10 and M. 2 would mean $20, 
and on ten shares of stocks M. i w^ould be $10. When this order 
was sent in to buy or sell, they would repeat back the message 
whether it was margin i or margin 2. That would indicate that 
they kncAV that was all the money supposed to be lost or deposited 
on that transaction. If the telegram read ' Buy i,ooo bushels 75, 
margin i.' it would indicate that it was supposed to be closed or 
exhausted at 74^-^. The commission of one-eighth added to the 
purchase price would make 73% net, and margined one cent per 
bushel would reduce the price down to 74/^. That is also true of 
stocks. The C. S. & G. Ex. got its proportion of the commission 
of one-eighth and I got mine. Their portion in grain was 25 cents 



450 GOLD BRICKS OF SPECULATION 

on a thousand ; my portion would be $i. The commission on stocks 
would be one-quarter, or $2.50 per ten shares, of which the C. S. 
& G. Ex. would retain 62^ c. In the course of business between me 
and the C. S. & G. Ex. if an order of that kind had been sent saying 
' Buy 1,000 bushels of wheat, 75, margin i,' and if the market de- 
clined to y^]4>, the man would lose $10. The loss on the transaction 
would be $10, and there would be no further telegrams between me 
and the C. S. & G. Ex. because it was generally supposed when a 
man put up $10 and margined at one cent, he was watching the 
blackboard, and could see when the market declined one cent a 
bushel, and take it for granted, so far as I know, that he was out of 
the market, and I make no further report to my customer about it, 
nor the C. S. & G. Ex. to me by wire." 

The witness further testified that in case a stop order was put in 
at 74, and the market closed at y^H one day, and opened the next at 
73 >^, the trade would be stopped at the price mentioned in the stop 
order, though the market never was at that price ; also, that he, wit- 
ness, never received nor delivered any grain nor handled any ware- 
house receipts, nor saw any, in any of his transactions with the C. S. 
& G. Ex; On cross-examination this witness testified that his cus- 
tomers knew that both he and the C. S. & G. Ex. Co. ran bucket- 
shops ; that such was the general opinion. 

The evidence shows clearly that the main part of the C. S. & G. 
Ex.'s business was dealing in futures on margins, without any inten- 
tion of delivering the grain sold or receiving that purchased by it, 
and that it kept a bucketshop, within the meaning of the statute, and 
used the market quotations in its bucketshop business. 

The court ruled the C. S. & G. Ex. to produce telegrams received 
in its business since July i, 1900, which it declined to do on the 
claim of constitutional privilege, which claim was allowed. 

A witness, Sanderson, clerk for the C. S. & G. Ex., testified that 
he had, as such clerk, recorded on certain sheets trades made with 
the C. S. & G. Ex., and the Board of Trade moved for a rule on 
the C. S. & G. Ex. to produce the sheets, which motion they resisted 
on the same claim of privilege, and the claim was allowed. 

A number of witnesses, some of them officers of the C. S. & G. 
Ex., refused to answer questions, relevant to the issues, on the like 
claim of privilege. When a party refuses to answer relevant ques- 
tions, or to produce evidence in his possession, or subject to his con- 
trol, the presumption is that the testimony, if given, or the evidence, 
if produced, would be unfavorable to him. (i Jones on Evidence, 
Section 17.) Although such refusal, if based on the ground that 



MARKET QUOTATIOXS—USES AXD ABUSES 451 

the evidence might tend to criminate the party, could not be used 
against him in a criminal prosecution, we are inclined to a view 
that in a civil case the general rule, as above stated, is applicable. 
It is certified by the learned judge who tried the case that " it was 
not necessary to a final disposition of said cause, to determine 
whether or not the complainant kept a bucketshop," and that such 
was his view is evidenced by the decree, and also by his opinion, a 
copy of which is filed in the cause here. We are committed to the 
opposite view. 

Christie-Sircct Commission Co. v. Board of Trade et al, 94 
111. App., 229. 

That was a case similar to the present, in which the appellant, 
complainant in the lower court, prayed an injunction to restrain the 
defendants from refusing to furnish the complainant with the market 
quotations, and the defense in that case, as in this, was that the com- 
plainant was keeping a bucketshop, and wanted the market quota- 
tions for use in that business. In that case we said : 

" But aside from any question of pleading, we are of the opinion 
that when it appeared to the chancellor that the aid of the court was 
sought to enable the complainant, appellant, to carry on an enterprise 
which was prohibited by the law, the chancellor could not do other- 
wise than deny the prayer. If it is not within the scop-e of chancery 
jurisdiction to punish or prevent crimes at the instance of private 
suitors, it is surely quite as far removed from the scope of equity 
to assist the law-breaker in his violation of the statute." 

The decree will he reversed. 

Reversed. 

The Illinois Supreme Court affirmed the above deci- 
sion April 16, 1902. 



Manufacturing Quotations. 

The art of making fictitious quotations for the " tape 
game '\ has been in vogue for many years, in fact almost 
since the inception of the bucketshop. Soon after the dis- 
covery was made that the quotations of an active Exchange 
furnished an uncertainty sufficient to attract persons to 
bet on them, and the bucketshop was thereby made 
possible, some ingenious fellow, noting the fact that quo- 



452 GOLD BRICKS OF SPECULATION 

tations were the only necessary thing- to acquire to operate 
the " game," struck upon the idea of preparing a set of 
quotations in advance by printing every evening upon an 
ordinary " ticker " tape a sufficient number of quotations to 
supply the " game " for the next day. This was accom- 
plished by re-winding the tape after the so-called quota- 
tions had been printed on it with rubber stamps and then 
placing it in a metal box of the size and shape of the roll 
of tape. The box was locked, but an aperture on the edge 
of it permitted the tape to be drawn out, which was done at 
the rate of one quotation every half minute. 

The box was placed upon a table or desk, in plain view 
of the players, and at 9 o'clock every morning an employe 
began to draw the tape from the box, calling off the quota- 
tions as they were disclosed. Another employe posted the 
quotations on a blackboard as they were called and the 
cashier accepted the bets of the patrons, who would make 
a pretence of buying or selling in lieu of betting that the 
next quotation would be higher or lower. 

This " game " was extremely popular for a time, and 
from the fact that the tape was the only device used, it was 
universally known as the " tape game." 

It was so clearly a gambling device that the police were 
forced to close the " games," but the disappearance of the 
" tape box," owing to the police raids, was quickly followed 
by the appearance of " tickers," by means of which the fic- 
titious quotations were received on a tape from some mys- 
terious source, and the " game " went merrily on. The 
'' tape game " had many advantages which the ordinary 
bucketshop using New York Stock Exchange or Chica,£ro 
Board of Trade quotations did not enjoy, among which 
were the following: 

The quotations were received from 9 A. M. to 4 P. M. 



MARKET QUOTATIONS— USES AXD ABUSES 453 

— seven hours each day — being 3)4 hours more than the 
period during which Chicago Board quotations and two 
hours more than New York Stock quotations are issued. 

Hohdays were disregarded except Christmas, New 
Year's and the Fourth of July. 

An active " market " was assured and a change in 
quotations each minute was a certainty. 

The promoters controlled the making and sending of 
the quotations, hence there \vas no danger of the patrons 
beating the game. 

Bets of $1 and upward were accepted. Two dollars 
and a half and $5 are the lowest sums accepted in a grain 
or stock bucketshop. 

It devolved upon the writer, as chairman of the Com- 
mittee on Gambling of the Civic Federation of Chicago, 
to prosecute the keepers and frequenters of this " game." 
Starting in wath police raids in March, 1896, it 'vvas not 
until the fall of 1898 that he succeeded in finally eradicat- 
ing the " game " in Chicago, and for some four years past 
it has not been permitted to thrive in any of the large cities 
of the United States. 

The closing of the " tape games " in Chicago was ac- 
complished only after enormous expense and labor. More 
than one thousand five hundred arrests were made in about 
thirty raids by the police. Fully one hundred indictments 
were returned by the Grand Juries, and when finally the 
most notorious and persistent keeper was convicted, he 
carried the case to the Supreme Court of Illinois, w4iere 
he was defeated. A brief sketch of one system of " tape 
games,'' operated by William Skakel, as developed by the 
evidence heard at his trial in the Criminal Court, will lay 
bare the methods adopted to give this " sure thing " the 
appearance of being just an ordinary bucketshop. 



454 GOLD BRICKS OF SPECULATION 

Skakel's '' Tape Game/' 

William Skakel operated four establishments in Chi- 
cago located at i86 South Clark Street (headquarters), 48 
Dearborn Street, 124 South Clark Street, and 170 Madi- 
son Street. The combined capacity of these places was 
such as to accommodate 1,000 patrons, and they were 
usually overflowing. In a room above the headquarters 
at 186 South Clark Street, prices were manufactured and 
caused to fluctuate by a peculiar method: — a telegraph 
operator sent them to the room below by telegraph to an- 
other operator, who called off the name of the stock, with 
an order to buy it, if it was to advance, or an order to sell 
it, if it was to decline. 

There were four stocks upon which fictitious quotations 
were constantly being made, viz. : Honolulu, Packing, 
Gould, and Tyndall. They represented nothing to the pat- 
rons of the '' game " and were never heard of outside of 
Skakel's establishments. If Honolulu was to advance', the 
telegraph operator would receive a message '' Buy Hono- 
lulu," which he would repeat in a loud voice. Immediately 
another employe designated as a " broker " would bid one- 
half point above the last cjuotation displayed on the black- 
board for Honolulu, which bid at once would be marked 
up by the blackboard man, and at the same time another 
employe would transmit the new quotation thus made to 
the other three shops by means of a transmitter and '' tick- 
ers " so that simultaneously the quotation would ap])ear on 
the tapes in the branches to l)e posted on the l)lackl)oards. 
In case the market was to decline the message would read 
" Sell Honolulu,'"' and the '' broker " would offer it one- 
half point below the last quotation posted. Thus for seven 
hours each day these fictitious stocks were made to fluctu- 



MARKET QUOTATIONS— USES AND ABUSES 455 

ate every half-minute, and the excitement was intense 
among- the motley throng that frequented the ill-smelling 
rooms. 

The fascination was in exact proportion to the hope- 
lessness of beating the " game," and fortunes were 
squandered by otherwise level-headed tradesmen in a vain 
effort to win Skakel's money. The clerk and office boy 
contributed their mite, and the tramps and beggars were 
welcome, as they made up " pots " of $i in order to get 
into a " deal." 

A synopsis of the testimony of one witness is given 
below : 

I am a grocer ; engaged in transactions at Skakel's place of busi- 
ness, 48 Dearborn Street, for the last three or four years. 

Q. — How many times ? 

A. — Well, every day when I used to go in, I used to buy as I 
had money to spend. I saw a machine there with a tape running 
out which showed quotations. I used to put up as much as I wanted 
on a $2 trade, and if it used to go against me, I would re-margin up 
to $100, not to let it freeze me out, but it froze me all the same, 
even if I did re-margin. 

O. — Did it freeze vou? 

A. — Every time. 

Q. — How much money did you lose in the freezing business ? 

A. — Between $5,000 and $6,000. I tried to buy stocks and they 
w^ouldn't sell any to me ; it was at the end of the month, and the 
stock was very low. 

Q. — Did vou see how it stood at the beginning of the next month ? 

A.— Yes.' 

Q. — Was it very much changed ? 

A. — About 23 points higher. It stood at 17; it opened up at 40. 
Never had any stock delivered to me. I offered to pay the full 
price and take the stocks on the trades on which I had margins, but 
never received any of the stocks. I went up to the buy or sell 
window and handed the money to the cashier, and told him I wanted 
to buy or sell, and he gave me a slip at once like one of these slips 
here — sometimes a red one ; sometimes a white one. The red one 
calls for sells ; the white one when I want to buy. If they went in 



456 GOLD BRICKS OF SPECULATION 

my favor, I handed them in to the cashier, and he closed them for 
me right there and then at the price on the board or off the tape. 
When I lost the tickets were destroyed. They were no good then. 
I knew when I had lost the way they marked it on the boards. The 
ticker showed when it went against me. If it didn't go high enough 
to freeze me then I saved the tickets, but it generally went high 
enough to freeze me. 

Skakel's '' tape games '' were described in quite a 
lengthy article by a Chicago newspaper reporter. His 
description of the room and its habitues was as follows : 

" ''' * '^ \ long dark room, reeking with smoke and all 
manner of stench, a couple of arc lights sizzling overhead, a black- 
board filled with long columns of figures, the clink of money eagerly 
shoved through the little windows at the diamond-studded cashiers 
in shirt-sleeves ; the momentary click of a ticker feeding out quota- 
tions ; the monotonous droning of ihe caller who reads off the 
figures from the tape, and a steady and uninterrupted hum of 
voices. * * * " 

'* * * '^' Here is the hell of the unfortunate speculator ; the 
place where he may have to pay the penalty for betting and losing. 
To be condemned forever to go on gambling without ever a chance 
to win ; to sit all day in a reeking, foul-smelling den, jostled by 
other dirty, foul-smelling victims ; compelled to watch imitation 
quotations of stocks which have no existence ; to go on ' speculat- 
ing ' though the capital be the quarter or half dollar that would 
stop the gnawings of hunger ; to use the old terms and expressions, 
' trades,' ' deals ' and ' margins ' ; to experience the same nervous 
excitement and the waves of hope and disappointment ; to grow 
seedy, then ragged, then dirty ; to give up all honest work and live 
on the charity of companions equally wretched ; to live starving, an 
outcast without one thought in life but to guess, and guess, and 
guess — trying forever to solve the unsolvable, to reduce chance to a 
certainty, to reach the infinite from the finite ! Surely here is a 
species of retribution, ideal in poetic fitness, and as cruel as this 
life affords. * * *» 

The following article, taken from the New York Com- 
mercial of Aug. 6, 1903, shows that the '' tape game "is 



MARKET QUOTATIO\S—USTS AXD ABUSES 457 

being substituted for the " regular " bucketshop in the 
Far West: 

SEATTLE'S NEW GAMBLE. 

Out in Seattle the bucketshop proprietors fancy that they have 
found a way to beat the new city ordinance. That enactment forbids 
the selHng or buying of stocks except for actual delivery. The old- 
style business goes on just as before, however, except that there is 
no expenditure for heavy telegraph tolls. Instead of buying New 
York stocks on margin according to the cabled Stock Exchange 
quotations, the customers of these concerns gamble on the quota- 
tions of mining stocks on a tape that arrives daily from San Fran- 
cisco by express. 

The bucketshops are busy morning, afternoon and evening. One 
night recently, after the day's business was over, the manager of one 
of the places obligingly explained the working of the gambling 
device to a correspondent of an eastern newspaper. 

" Formerly," he said, " we used to deal in New York stocks, 
but when the city council passed the ordinance making it unlawful 
to sell stocks except for delivery, we found ourselves in a difficulty, 
for these stocks frequently could not be obtained without sending to 
New York. 

" Our company, however, has control of the stock in a number 
of mining companies. These stocks we sell on commission, or, if 
it is preferred, the patron can buy for a rise or sell for a fall in the 
quotations, which are determined by this tape." 

Here the manager produced the tape that had been used during 
yesterday's operations, and explained its use. 

" We get one of these tapes each day from San Francisco," said 
he. " It arrives by express in a carefully sealed package, and it is 
at once placed in this machine. When it is set going the quotations 
of the various stocks are read out and written up on the blackboard. 
For instance, if you buy one hundred shares at a certain figure, and 
the next quotation on the tape shows an advance, you can sell and 
get the difference in price, less our commission, and similarly if you 
wish to sell for a fall. Of course, if you want it, we will always 
deliver the stock. We have plenty of it here, but we do not often 
of¥er the stock, and it is rarely asked for. 

" We often used to suffer from delays when we were dependent 
on wire quotations from New York, but with this tape there are no 
delays, and we find it quicker and better in many respects. 

'' Yes, it is true that the quotations are, in a sense, fictitious, but 



458 GOLD BRICKS OF SPECULATION 

they are put as nearly as possible at the market values, which, of 
course, are constantly fluctuating, and it makes a nice little gamble." 



Counterfeiting Quotations. 

In 1900, when the Chicago Board of Trade decided to 
withhold its quotations from the telegraph companies until 
they would agree not to furnish them to bucketshops and 
would pay a reasonable price for them (which demand 
was finally acceded to by all the telegraph companies) 
there immediately developed a system of piracy, having for 
its object the procuring of quotations surreptitiously for 
the benefit of the illegitimate interests, which the new 
arrangement prevented from receiving the official and con- 
tinuous quotations directly from the telegraph companies. 

Wife-tapping, signalling, telephone transmitters hid- 
den in walls, so as to convey the sound of telegraph instru- 
ments to a telegraph operator blocks away, and various 
other methods were resorted to in order to procure for the 
bucketshops that without which bucketshops cannot exist 
— quotations. 

With the quotations going to hundreds of legitimate 
dealers by " ticker " and telegraph, the opportunities to pur- 
loin them were many but expensive and accompanied with 
more or less risk. The class of men engaged in operating 
bucketshops, however, do not hesitate long when face to 
face \\\\\\ the alternative of closing their shops or stealing 
quotations, and the ''game" is so lucrative that they can 
afford to employ the most eminent " wire-tappers " and 
lawyers. 

In order to protect the quotations, numerous suits were 
instituted by the Board of Trade and the telegraph com- 
panies in the Federal Courts of Illinois, Missouri, Wis- 



MARKET QUOTATIOXS—USES AND ABUSES 459 

consin, Indiana, Minnesota, Michigan, Nebraska, Pennsyl- 
vania and New York for the purpose of obtaining injunc- 
tions prohibiting bucketshops and their emplo3XS from 
obtaining, receiving, selhng, or distributing the quotations 
of the Chicago Board of Trade. Both the Board and the 
telegraph companies claimed a property right in the quo- 
tations which was being greatly damaged by the defend- 
ants, who, after stealing the quotations, published them 
indiscriminately and used them for purposes prohibited by 
law, z'l::. : gambling and bucket shopping. 

The first case decided was by United States Circuit 
Court Judge Kohlsaat on October lo, 1900, and he sus- 
tained the contentions of the Board of Trade and the tele- 
graph companies. In brief, the decision was as follows : 

DECISION. 
That there exists in the Board of Trade of the City of Chicago a 
right of property in the quotations made upon the transactions of 
its Exchange, until the same are made over to the public. That it 
was within the powers of the Board of Trade to convey to the tele- 
graph companies the property right in said quotations, in the manner 
set out in its contract with them, and that the telegraph companies 
acquire good title to the same by said contract. That the defendants 
have appropriated and used said quotations before publication 
thereof, wrongfully and contrary to law, and in violation of com- 
plainant's rights. '^' * * That there is indubitable proof that 
defendants have entered into a scheme to defraud some one out of a 
valuable property right. 

The injunction was granted, and the Circuit Court of 
Appeals affirmed the order of Judge Kohlsaat. 

Towards the close of 1902 it became apparent that, so 
far as the quotations of the Board of Trade of Chicago 
were concerned, the bucketshops were doomed. With one 
exception, all decisions had been favorable to the conten- 
tion of the Board, and it was evident that within a year or 
two the property-right law would be firmly established, 



460 GOLD BRICKS OF SPECULATION 

and that only legitimate concerns could use the quotations 
of the Board. 

Realizing that the end was approaching, the bucket- 
shop interests, like a drowning man, " grasped at a straw," 
and embarked upon the most dangerous enterprise yet 
undertaken, viz. : the counterfeiting of the quotations of 
the Chicago Board of Trade and of the Minneapolis Cham- 
ber of Commerce. 

As demonstrated by the establishment of '' tape games '' 
any set of prices that will fluctuate throughout the day, 
whether real, fictitious or counterfeit, are sufficient for the 
purposes of gamblers, and the more frequent the fluctua- 
tions the more desirable they are from the standpoint of 
the " tape game " or bucketshop-keeper and his patrons. 

Threatened with annihilation by the aggressive and 
successful crusade of the Chicago Board of Trade and the 
tendency of other Exchanges, notably the Minneapolis 
Chamber of Commerce, to adopt similar methods -to pro- 
tect their quotations, the bucketshop fraternity was driven 
to desperation. As a last and hopeless endeavor to place 
upon their blackboards some figures purporting to be the 
prices of grain and provisions on an Exchange, they estab- 
lished at Minneapolis a " fake " Exchange and from it 
received " (juotations " continuously, which were counter- 
feits of the quotations of the Minneapolis Chamber of Com- 
merce. As wheat is the only active commodity dealt in on 
the Minneapolis Exchange, only three men were required 
to run the " fake " Exchange and go through the form of 
trading at the last price quoted on the Chamber of Com- 
merce floor. By means of a secret telej^hone system they re- 
ceived the real quotations from some unknown source. Im- 
mediately one of the inmates would bid that price, or offer 
to sell at that price, and this bid or offer would be accepted 



MARKET QUOTATJOXS—USRS AXD ABUSES 461 

by one of the other two. Then Ijv means of another tele- 
phone the price would 1)e transmitted to the head(|uarters 
of the biicketshop system responsible for the establishment 
of this counterfeiting den, to be used as the basis of '' pur- 
chases " and '* sales '' in numerous branches throughout 
the Dakotas, Minnesota, Wisconsin and other portions of 
the Northwest. 

Notwithstanding the fact that the promoter of this 
enterprise, who is also the owner of the system of bucket- 
shops above referred to, is a well-know^n confidence man 
and notorious " wire tapper," and that the legitimate in- 
terests have frequently warned the public to beware of 
him, he prospers, simply by reason of apparent determina- 
tion of the public to beat another man's game. It seems 
to be a truism that the more transparent a scheme to de- 
fraud is, the more disreputable the promoters are, and the 
more the public is warned to avoid it, the greater w^ill be 
its success. 

At Chicago it became necessary to establish a more 
elaborate system of producing '' quotations," for the reason 
that the Chicago markets are far more active than those 
of Minneapolis, and trading is not confined to wheat. So 
it was essential in order to furnish a substitute for the 
Chicago Board of Trade quotations to counterfeit the 
quotations not only of wheat, but also of corn, oats, pork, 
lard and short ribs, all of which are traded in for future 
delivery. 

By gaining control of and prostituting the functions 
of a small Exchange known as the Chicago Open Board 
of Trade — which the Chicago Board of Trade had pre- 
viously refused to permit to receive or post its quotations — 
the bucketshop fraternity evolved an elaborate machine 



402 GOLD BRICKS OF SPECULATION 

under the guise of an Exchange to grind out '' quotations " 
for them, much in the same manner as at Minneapohs. 

This desperate scheme to prolong the hfe of the hucket- 
shop was too expensive and dangerous to endure for many 
months, but it absolutely divorced the bucketshop from all 
claims to semi-respectability and put it in the same cate- 
gory with the '' tape game." 

The following excerpt from the Chicago Record-Herald 
of May 22, 1903, relates the final downfall of this scheme: 

The Open Board of Trade has made its peace with the Regular 
Board of Trade. Late yesterday notice was served on the Western 
Union that the Open Board of Trade quotations would no longer be 
furnished for distribution. The Open Board has made a contract 
with the big exchange and will be given the regular quotations as 
of yore. The numerous bucketshop establishments which have been 
doing business on the circuit of quotations furnished from the 
transactions of the Open Board will be without their tickers this 
morning. The war between the two Exchanges, the big and the 
little one, is at an end. The new administration of the Open Board, 
elected on the reform ticket, met Wednesday and accepted a con- 
tract with the regular Board of Trade. In return the big Exchange 
is to reinstate the Open Board in the list of its approved applicants 
for quotations. The war between the two Exchanges began some 
months ago. The big Board cut off the little one from the use of 
grain quotations because of alleged irregularities. The latter was 
then seized upon by certain rich bucketshop interests and an effort 
was made to establish a new independent grain market, whose 
quotations should be free to all without any restrictions. The grain 
pit of the little Exchange was filled with brokers representing the 
bucketshop people, and the effort was made to keep a brand new 
market going. The Western Union wires were established in the 
Open Board exchange hall and a circuit of quotations was served 
to all who paid for them. They were taken liberally by the bucket- 
shop establishments ever3'where. 

But with all the money spent and all the efforts the scheme was 
a failure. The market was a bogus one. Those who did a legiti- 
mate business on the Open Board of Trade found that their custom- 
ers were dissatisfied with the prices obtained because they were wide 
away from the prices on the regular exchange. 



MARKET QUOTATIONS— USES AND ABUSES 463 

Recently the reform element on the Open Board elected its own 
administration and ousted the men favorable to the bucketshop 
alliance. 

Peace with the big Board lias followed. 

It is expected now that the relations between the Chicago Board 
of Trade and the Open Board of Trade will be as friendly as those 
existing between the New York Stock Exchange and the Consoli- 
dated Exchange of New York, the big and little Exchanges at 
Gotham. 

Following- the discontinuance of the Chicago Open 
Board of Trade's distribution of quotations, the promoters 
of the so-called Independent Exchange of Minneapolis, or- 
ganized for the purpose of counterfeiting the quotations 
of the Minneapolis Chamber of Commerce, added a new 
department to that institution. The new department has 
for its object the making and distributing of grain and pro- 
vision quotations similar to those of the Chicago Board of 
Trade, and is known as the " Chicago Delivery Market/' 

By stealing the continuous quotations of the Chicago 
Board and subjecting them to the same process to which 
the Minneapolis quotations are subjected, this so-called 
Exchange is producing a line of quotations solely for use 
in bucketshops and has the effrontery^ to go into court 
claiming that the quotations are genuine and the result of 
bona fide transactions. And Judges listen to their plead- 
ings ! 



PART V, 



Thh Duties of Agencies for Good, 



CHAPTER I. 

THE DUTIES OF THE EXCHANGES. 

Why and how Exchanges should work to protect their reputations 
and destroy swindHng schemes based on their market quota- 
tions ; results in Chicago. 

The reputable stock, grain and cotton Exchanges, in 
justice to themselves and as a measure of self-protection, 
have a duty^ to perform, which, excepting the case of the 
Chicago Board of Trade, has been almost entirely neg- 
lected. In the year 1902 the Minneapolis Chamber of Com- 
merce and the New York and New Orleans Cotton Ex- 
changes showed signs of awakening to a realization of the 
situation. For eight years past the Chicago Board has 
waged vigorous warfare on all forms of fraud relating to 
the grain business, but it is impossible for it to cover the 
whole country successfully or to prosecute swindlers, ex- 
cept locally. The success of the campaign against bucket- 
shops and " get-rich-quick " swindlers in Chicago, has 
been encouraging and almost complete. One nest of in- 
iquity remams, but it is probable that even it will be swept 
out before the close of 1903. That work accomplished Chi- 
cago w411 be cleared of illegitimate grain brokers. At the 

465 



466 GOLD BRICKS OF SPECULATION 

time of this writing less than a dozen " fake " concerns 
are in operation, compared with one hundred when the 
work was begun. The Exchange has succeeded in with- 
hokhng its quotations from ever)^ knozvn bucketshop in 
Chicago, so that for a year past no illegitimate concern has 
found it possible to use the Board of Trade quotations for 
the purpose of betting with its patrons. 

The campaign which, in 1896 and 1897, the Board con- 
ducted against stock and grain gambling, drove many of 
the swindlers out of Chicago, and the postoffice inspector- 
in-chief, in his annual report to the postmaster general, 
under date of October 24, 1897, made the following com- 
ment upon the situation and upon the attitude of the Chi- 
cago Board of Trade : 

Last year (1896) was fruitful in one way that was gratifying, 
and that was crushing the hucketshop business in Chicago. This 
is a sort of gambling second only in importance to the Louisiana 
Lottery in former days. Of no bucketshops and tape games, which 
have gone out of existence, fifty-eight were closed by fraud orders 
issued by the Postoffice Department ; twenty-six quit upon the find- 
ing of indictments by State and federal juries, many of the prin- 
cipals disappearing and evading arrest ; and twenty-six closed when 
it became apparent that the prosecution was being pushed vigorously. 

The Postoffice and other departments of the Government are 
not wholly responsible for the successful warfare on this enterprise, 
as the force of inspectors could scarcely have accompHshed every- 
thing which was done in this direction, but for the heroic fight made 
by the Civic Federation and the Chicago Board of Trade, to whom 
great credit is due. Should the city, however, become entirely 
freed from this demoralizing evil, it will not be on account of the 
severity of the penalties which were imposed upon those offenders 
who were convicted in the L^nited States Court, for the heaviest 
dealers who made thousands of dollars off their deluded victims by 
this thieving game were sentenced to pay a fine of $200, not enough 
to pay their telegraph bills for one day. One of these concerns 
paid a certain telegraph company $50,000 a year for private wire 
service. The interest of the authorities of various States, whose 



THE DUTIES OE THE EXCHANGES 4G7 

citizens are being robbed by these methods, promises to materially 
assist in the extinction of the bucketshop. 

Under date of November i, 1902, the Commercial West 
of Minneapolis published the following statement, which 
I furnished it by request : 

For the past year Chicago has been practically rid of the bucket- 
. shop pest. There are a few little shops working on the New York 
stock quotations, but they are so insignificant in number, so uncer- 
tain of life, and so retiring in their disposition, that, like the Irish- 
man's flea, '' If you put your finger on them they are not there." 

It is now a year since the bucketshops abandoned their efforts to 
use the Chicago Board of Trade quotations in this city, and there is 
no good reason for their appearmg on a bucketshop blackboard in 
this city again. 

As the efforts of the Chicago Board of Trade are extended to 
other cities, bucketshops operating there will fade away just as 
they have done in Chicago. 

By the decision rendered on Tuesday, October 28, by the United 
States Circuit Court of Appeals, whose jurisdiction extends over the 
states of Indiana, Illinois and Wisconsin, the property right of the 
Board of Trade in its quotations w^as firmly estabhshed, and only 
those concerns that are doing a legitimate business are entitled to 
use the quotations. The value of the decision is that it determines 
the law over a wide territory and establishes a precedent which other 
courts undoubtedly will follow. This is a new question and was 
ably presented by the attorney of the Board of Trade, Mr. H. S. 
Robbins, who is establishing a national reputation through his per- 
sistence and intelligence in handling the legal affairs of the Board 
of Trade. 

At present the Chicago Board of Trade has similar cases pending 
at Minneapolis, against the Coe Commission Company ; at Omaha, 
against the Boyd Commission Company and two others ; at Cincin- 
nati, against the O'Dell Commission Company ; at Indianapolis, 
against L. A. Kinsey & Co. and thirty-two others ; and at St. Louis, 
against the two principal bucketshops in that city. 

The case of the Christie Grain and Stock Company at Kansas 
City, in which Federal Judge Hook decided in favor of the Board of 
Trade, has been appealed, and like the case just decided, will be 
submitted to the circuit court of appeals for that district. It is the 



468 GOLD BRICKS OF SPECULATION 

intention of the Board of Trade to push these cases as rapidly as 
possible and it is hoped that within a year no bucketshop in the 
western states will find it safe or profitable to use the quotations of 
the Chicago Board of Trade in their nefarious operations. 

In all cases in which bucketshops are using the Chicago grain 
quotations, they are obtaining them by theft, and although they 
seem to be satisfactory to the shop and its patrons, we find upon 
investigation that in most cases they are unreliable and behind the 
service which is furnished to legitimate houses. 

The members of our Exchange are gratified at the firm stand 
that the JNIinneapolis Chamber of Commerce has taken in regard to 
its quotations. It is the first indication we have seen that the Board 
of Trade is to receive outside support in the fight against the bucket- 
shops, and I desire to congratulate Minneapolis and wish it success. 

But the mere withholding of quotations from bucket- 
shops does not end the Exchange's duty; the field is a 
broad one and must be fully covered before its obligations 
to the public are discharged. The first and essentially the 
most important task for the Exchange, is to scrutinize 
closely the acts of its own members, and by the exercise 
of its disciplinary power, eliminate all knavery and scan- 
dalous practices, root and branch. 

Only when an Exchange has established a high stand- 
ard of commercial morality among its members, is it in a 
position to attack the outside pirates consistently and 
successfully. 

Exchanges cannot afford to tolerate even the appear- 
ance of evil among their members. The moment they be- 
come lax in vigilance and discipline, they lose all their 
power for good in the community, and breed and foster, 
under the guise of legitimacy, the very worst forms of 
commercial piracy. The dishonest broker shielded by a 
membership on an Exchange is the most dangerous of 
all swindlers, for too many Exchanges permit him to make 
a reputation for the entire Exchange, while his dishonest 



THE DUTIES OE THE EXCHAXGES 409 

practices invariably result in contaminating- all who come 
in contact with him, whether as employes or as competi- 
tors. A dishonest broker's sources of revenue are not lim- 
ited to the comnn"ssions paid him; hence, when a com- 
petitor, he forces otherwise honest brokers to adopt meth- 
ods as dishonest as his own, or to suffer the humiliation of 
abandoning their business. 

To the looseness of discipline and the cowardice of 
governing bodies of Exchanges is indirectly chargeable 
much of the criticism of Exchange methods, for the Ex- 
change that supports or even tolerates a broker whose 
methods are notoriously bad, cannot rise above that 
broker's reputation. 

After years of close investigation and observation, I 
am convinced that the bucketshop and " get-rich-quick " 
evil flourishes best side by side with an Exchange which 
is careless w^ith its owm reputation. 

Exchanges should use every means to teach the public 
that reliable brokers do not resort to sensational advertis- 
ing. A sensational advertisement should be sufficient no- 
tice to the public to avoid the individual or the firm insert- 
ing it in a newspaper or printing it in any form. High- 
class Exchanges frown on such methods, and the New 
York Stock Exchange and the Chicago Board of Trade 
members are prohibited from resorting to them, as shown 
by the following resolutions adopted by these associations : 

RESOLUTION OF XEW YORK STOCK EXCHANGE. 

Rcsok'cd, That in the future the publication of an advertisement 
of otlier than a strictly legitimate business character, by a member of 
the Exchange, shall be deemed an act detrimental to the interest and 
welfare of the Exchange. 

RESOLUTIONS OF CHICAGO BOARD OF TRADE. 
Resolved, That advertisements inserted, or caused to be inserted, 
in the public journals, by members of this Board, pretending to pre- 



« 

470 . GOLD BRICKS OF SPECULATION 

diet the course of the markets or describing plans or schemes, more 
or less plausible and sensational, by which money may be made, are 
devoid of any commercial character whatsoever and are injurious to 
the good name and dignity of this association. 

Resolved, That it is the sense of this Directory that such adver- 
tisem.ents are unbecoming a member of this Board and are deemed 
dishonorable conduct within the meaning of Section 9 of Rule 4 of 
the rules of the Board of Trade of the City of Chicago. 

The London Stock Exchange has a rule which pre- 
vents confusion and which makes it impossible for any 
person, who has been defrauded by a '' snide " broker, to 
excuse himself on the ground that '' he thought he was 
dealing through a Stock Exchange member." 

Adopting the methods of the dignified professions, 
such, for instance, as law and medicine, the reputable mem- 
bers of which do not advertise, this Exchange prohibits 
its members from advertising at all. The public is made 
aware of the fact by a newspaper advertisement inserted 
by the Exchange itself, as follows : 

No member of the Stock Exchange is allowed to advertise for 
business purposes or to issue circulars to persons other than his 
own principals. 

Persons who advertise as brokers or share dealers are not mem- 
bers of the stock exchange, or under the control of the committee. 

Sooner or later the Exchanges of the United States 
will be forced to adopt this or a similar method of self-pro- 
tection, unless the spurious broker is in some way elim- 
inated. 

Therefore, it behooves the legitimate Exchanges of the 
country : 

First : To repair, if necessary, their own reputations, 
and by the exercise of " eternal vigilance " keep their mem- 
bers up to a high standard of commercial morality. 

Second: To so educate the public that they will 



THE DUTIES OF THE EXCHANGES 471 

abandon their crude notions of Exchange trading, and 
distinguish between legitimate contracts for future de- 
Hvery and bucketshop gambhng. 

Third: To attack, expose and prosecute all forms of 
gambling on Exchange quotations, and all " get-rich- 
quick " schemes, to demand of Federal and State author- 
ities the enforcement of laws, and to insist that public 
officials do their duty. 



472 GOLD BRICKS OF SPECULATION 



CHAPTER 11. 

THE DUTIES OF THE PRESS. 

Success of swindles depends on ability to purchase advertising 
space : the editorial and the advertisement ; the press should 
guard the public ; the public should aid the press. 

Responsibility for the success of bucketshop swindles 
must, with some notable exceptions, be assumed by the 
great newspapers of the United States. The inconsistency 
of their attitude greatly redounds to the advantage of the 
promoters of fraudulent enterprises; for while their edi- 
torial writers labor valiantly to produce strong denuncia- 
tions of bucketshops, *' get-rich- quick " schemes, and all 
similar frauds, the advertising managers are taking the 
money of the same or similar enterprises for advertising 
space. If, after reading the editorials, the reader turns to 
the advertising column, his confidence in the advertisement 
is necessarily increased by the fact that the editorial and 
the advertisement are found in the same issue. It is use- 
less, however, to attack the press, as it is only through the 
press that the press can be reached, and in view of the in- 
come (which I estimate at $20,000,000 per year) derived 
from this class of advertisements, it may be some years be- 
fore the great journals can see their way clear to in- 
augurate such reforms in their advertising departments 
as will place them on the same moral footing with the 
editorial departments. 

But it must be admitted that the success of all great 
swindles of the classes treated in this volume is in propor- 
tion to the promoters' ability to purchase advertising space 



THE DUTIES OE THE PRESS 473 

in reputable newspapers, and that very few of the great 
newspapers consider the character of the advertisements 
submitted to them. 

When the newspapers are in a position to refuse to 
subject their readers to the dangers of advertisements, 
many of which their advertising managers know, when 
they accept them, to be " fakes," and of others which even 
a superficial investigation would show to be rotten, 90 per 
cent, of the " get-rich-quick " schemes will fail. 

The most dangerous advertisement accepted by news- 
papers is that known as " $1 a line " or " reading ad," the 
following example of which appeared in a Chicago news- 
paper in the form of a New York dispatch: 

DOCTOR'S QUICK FORTUNE. 

By Eollowing Sage Advice He Turned $500 into $10,000 in Ten 

Days. — Dr. Clifton Sparks of Bensonhurst is the Happiest 

Winner in the Big Jump in Manhattan. 

New York, Nov. 28. — By far die biggest winner (in propor- 
tion) in the recent rapid rise in Manhattan is Dr. Clifton Sparks of 
Bensonhurst, L. I., who, with a modest $500, saved from his prac- 
tice, gathered in, on the advice of \Vall street friends, $10,000 in 
the ten days Manhattan *' L " road stock took to go from 133 to 158. 

He was pkicky through it all, for every time his capital doubled 
he invested it all again, but especially was he wise with it all, for 
when he was told to sell he did not become possessed of the idea 
that he " knew it all." 

He followed the advice to sell as quickly as he did that to buy, 
and so missed the temporary slump that sent the stock back to 149. 

In receiving congratulations Dr. Sparks is becomingly modest. 
'' I'm extremely glad that I have made this nice little fortune," he 
says, " but I am more than extremely grateful to the hands that 
piloted me. It was through no knowledge of mine I won. I must 
give all the credit to my friends in the Lincoln Financial Bureau at 
No. 44 Broadway, New York city. 

" But then I had implicit confidence in them because I and sev- 
eral of my friends had already profited, but in a smaller way, by 



474 GOLD BRICKS OF SPECULATION 

reading their free booklet and following out their Stock Market 
information. So, when I got this chance to make a nice lot of 
money, I relied implicitly on the Bureau's excellent judgment and 
was wise in that I did exactly and promptly just what I was told/' 

There's a moral in that for every one. Don't jump wildly into 
something you know nothing about, on the grounds that what other 
men can do, you can do. 

Look around for a man who does know, and wdien you find him, 
do what you're told. 

That some newspapers, while editorially denouncing 
the '' get-rich-quick " scheme, will not only publish such 
canards as this, but will continue to accept money for their 
advertisements, is shown by the following clippings from 
a very prominent western paper : 

{Editorial, March 7, 190^.) 
SEVENTY-FIVE PER CENT EXPERIENCE. 

It is reported that one of the get-rich-quick schemes will return 
to the depositors 25 per cent of their investment. The loss of the 
other 75 per cent is a pretty stiff lesson, but it is a question if other 
swindles of a similar kind will flourish any the less on account of this 
fresh chapter of deception and loss. As long as persons are ready 
to believe that they can place money so as to receive large weekly 
or monthly dividends, doubling the principal in the course of a single 
year, there will be plausible individuals and so-called corporations to 
encourage the ideas. The game on their part is a simple one. They 
pay dividends from the deposits, putting aside for themselves, in 
secret places, the larger half when the bubble bursts. Early depos- 
itors, having received numerous dividends, become active advertisers 
of the operation, and paid touts are widely distributed. When the 
trap is sprung, depositors possibly receive one-fourth of their money, 
though in many cases they get nothing. 

If persons caught by such palpable frauds would only paus.e to 
consider that legitimate dividends must be earned before they can 
be paid, they would realize that the so-called investments offered are 
nothing but a rascally snare. The government of the United States 
can borrow money at 2 per cent a year ; states and municipalities at 
from 3 to 5 per cent, and persons of unquestioned standing at 5 per 
cent or less. Where, then, can money be used so as to produce 100 
or 200 per cent a year for depositors? Money must be paid in as 



THE DUTIES OF THE PRESS 475 

profits before it can properly be paid out as dividends. Who could 
be found willing to pay such profits for the use of money? As far 
as the depositors in the get-rich-quick schemes received any divi- 
dends, it was from their own money, and the collapse is a melancholy 
proof that the bulk of their deposits is a total loss. 

{Advertisements of the follozving day, March 8, 1^03.) 
$20 EARN.S $300 IN THREE DAYS. 
We have demonstrated it, and can convince you ; our twenty 
years' experience and an enormous expenditure of money have 
enabled us to earn larger profits for our continuous subscribers than 
can be earned in any other legitimate enterprise ; opportunity still 
open ; new arrangements have been perfected w^hereby we expect to 
do even better in the future; national bank reference on request; 
write for booklet and full particulars. STAR AND CRESCENT 
CO., Suite looi, 226-228 La Salle St., Chicago, 111. 



If you feel reasonably sure that by investing $100 you could 
make, in the course of the racing season, anywhere from $800 to 
$1,500, would you be willing to take a fair, square chance, where 
the percentage in your favor would be better than 3 to i ? In fact, 
with any ordinary luck, it is a practical certainty ; 60 shares for sale. 
You can take one or more and be associated with an experienced 
man, where square treatment will be the thing. No sucker money 
wanted. For further particulars address F. C. FARRINGTON, 
Room 423 Macheca Bldg., New Orleans, La. 



Stocks and grain : The country is approaching the greatest spec- 
ulative period ever known in these markets, and those who take 
proper advantage of this situation should reap enormous profits. 
Send for our bulletin letter and new book, at once. Grain and 
stock brokers, exchange and board members. 



Following the crash among the turf swindlers in Feb- 
ruary, 1903, the Missouri State Senate Investigating 
Committee, in its elaborate report, took occasion to criti- 
cise the newspapers. A St. Louis paper editorially made 



the following defense: 



476 GOLD BRICKS OF SPECULATION 

TURF CONCERNS. 

On the assumption that the State Senate Committee's report on 
turf-investment concerns was governed throughout by a sincere 
desire to present the facts, and not by the poHtician's wilUngness 
to destroy the influence of newspapers, the fair comment on that 
part of the report affecting the metropohtan newspapers is that the 
members of the committee fell into several errors on account of the 
limited time available for investigation. 

At least two members of the committee knew months ago as 
much about the turf-investment enterprises as the newspapers knew. 
The committee might thus have been expected to understand the 
chief features of the operations extending over three or four years. 

In the report the committee says : 

" Your committee, fully realizing the educational value of the 
press, regarding it as a potent factor in the land for good or evil, 
and appreciating what it has accomplished along progressive lines, 
we desire at this time to inform the public that the great metropoli- 
tan dailies should bear their just proportion of censure for the con- 
fused condition of affairs existing at this time, owing to the fact 
of the recent failure of the turf-investment and of other speculative 
companies. Every one of these institutions investigated by your 
committee depended upon the metropolitan newspapers as their 
greatest instrumentality for the furtherance of their schemes, as 
the most potent agency through which they could confuse the public 
mind, mislead the unsuspecting, and rob the people of their money." 

It is a matter of the commonest information in St. Louis that 
the concerns did not depend on the metropolitan papers at all during 
the period of their success. The back of the business was broken 
before they began t^o put conspicuous advertisements in the daily 
papers. 

Almost wholly, during the time of their growth, they used corps 
of solicitors and carefully prepared circulars, appealing to the cus- 
tomer's love of a '* good thing on the inside." They obtained and 
used, in this '' inside " way. the nam.es of more or less well-known 
men, some of them in politics, in connection with testimonials recit- 
ing their great profits and reliability. 

Advertisements did not appear prominently in daily papers until 
the concerns were on the verge of collapse. Probably very few cus- 
tomers were influenced by them when they did appear. 

Now, as to the duties of newspapers in accepting or refusing 
advertisem.ents from such concerns. Of course, if a paper has 
actual knowledge of fraud in a business, its plain duty is to refuse 



THE DUTIES OF THE PRESS 4t'n 

the use of its columns at any price. But a newspaper is not an 
institution for the protection of men against the consequences of 
their avarice. Moreover, an advertising department must give 
reasons for refusing space. It has no moral right — leaving aside 
the ordinarv business rules followed in all occupations — to tell a 
man that his business is fraudulent, and decline to enter upon com- 
mon routine contract relations, unless there is convincing evidence. 
It is a weak part of the report, this attack upon newspapers. If 
the United States Government had not given the concerns an official 
clean bill of health, and if men of some prominence had not given 
their indorsement, and if Legislatures had not piled up libel laws, 
the newspapers might have been able to expose these concerns before 
they had done a great deal of harm. 

And yet there are newspapers in this country that re- 
fuse the " ads " of bucketshops, " get-rich-quick '' brokers 
and turf swindlers ! 

It would be an insult to the press to say that it cannot 
distinguish between legitimate enterprises and " get-rich- 
quick " schemes. And the press, by a proper use of its 
columns, can destroy every swindling game in this country. 
Libel laws, which it professes to fear so wholesomely, 
would not protect the well-known experts in fraud who 
fatten on the pittance of the washerwoman and the servant 
girl. The press could protect those who lack the 

INTELLIGENCE, THE INFLUENCE, OR THE MONEY TO PRO- 
TECT THEMSELVES. All legitimate brokers and merchants 
should, by judicious advertising, lend material aid and en- 
couragement to the press, for it must be admitted that the 
great newspapers are compelled to rely largely on the ad- 
vertising department for their success. 



478 GOLD BRICKS OF SPECULATION 



CHAPTER III. 

THE DUTIES OF THE BANKS. 

How swindlers appeal to depositors in savings banks ; bankers 
should warn depositors ; communities suffer indirectly, when 
individuals are swindled. 

The bankers, especially in the smaller cities, should 
endeavor to check the tendency of their depositors and the 
general public to invest in impossible schemes, schemes 
promising returns so great as to brand them as absolutely 
fraudulent. A favorite argument of the '' faker " is to draw 
a comparison between the small returns of interest derived 
from deposits in savings banks, and the " assured income " 
(payable weekly or monthly) from a small investment in 
his particular " safe method " of investment or speculation. 
Almost every swindler appeals to the depositors in a sav- 
ings bank, either directly or indirectly, in this way. I have 
a pamphlet published by a firm of so-called bankers and 
brokers, 58 and 60 Broadway, New York, bearing the title : 
"WHEAT AND SAVINGS BANKS COMPARED." 
The first paragraph follows : 

There is a form of investment in the market that affords for the 
investor a certainty of profit as reliable as a deposit in a savings 
bank or an investment in government bonds. This investment con- 
sists of selling wheat ; that is, in selling wheat at the beginning, and 
in continuing to sell it at the expiration of each successive option. 
We take great pleasure in acquainting our clients with a method 
whereby, with a small capital, an assured income may be accom- 
plished with a minimum of risk and a maximum of certainty. 

A letter from the author of the booklet illustrates his 
scheme for drawing small sums from the unsophisticated. 



THE DUTIES OF THE BANKS 4T9 

The letter-head bears the following guarantee printed 
across the top: 

WEEKLY INCOME GUARANTEED BY FOLLOWING THE 
DODGE WHEAT PLAN. 

The letter contains the following proposition: 

" I will be pleased to accept as a trial investment an account as 
small as $io, which may be increased from time to time. If a small 
account I will combine it with other accounts and divide the profits 
equally, mail profits each week or month, as you desire." 

This is a sample of hundreds of schemes launched each 
year, to swindle the men and women of this country. 
Having followed the career of hundreds of the promoters 
of these schemes, I have been impressed by the stupendous 
robbery of the innocent that I see going on day after day 
without being able, except in a small way, to check it. The 
duty of bank officials in preventing so far as possible the 
deception of their depositors and the public by schemes of 
this character, was so well defined in an editorial in the 
New York Financier of April, 1897, that it will bear re- 
printing. The editorial read as follows: 

FINANCIAL IDIOCY. 

The smash in " bucketshop " circles in New York city during 
the past week has nothing in commqn with banking, and yet it does 
seem that the bankers of the country, and especially those connected 
with savings institutions, have a duty to perform in the matter 
almost as important as that rendered in the sound money campaign 
last fall. A large amount of the millions out of which poor people 
are mulcted by '' discretionary pool " swindlers each year comes out 
of the savings banks of the country. 

In one town in New York the withdrawals by depositors bitten 
with the speculative fever were so large as to call forth public 
protest from the bank officials, who exposed the utter folly of the 
'' discretionary pool " business in a few words. We believe that if 
this course had been followed by the officers of other banks the 
recent losses of large sums of money would have been largely re- 



480 GOLD BRICKS OF SPECULATION 

diiced in volume. The law does not make savings bank officials the 
guardians of their depositors, even if it does impose that duty with 
respect to their money, but in cases like the above the officers per- 
formed only a public duty in warning people not so well informed 
of the fraudulent nature of this business. There may be a lull in 
the speculative craze for some time to come, as a result of the 
exposures lately made in New York, but at the same time it might 
not be amiss to prevent its subsequent growth by the wide circula- 
tion of common sense literature on the subject. Any bank officer 
can, in a few hundred words, riddle the most plausible argument 
written on the possibility of paying 24 per cent interest on money, 
and if put in pamphlet form, or printed in local papers, such an 
article would have an effect beyond calculation in preventing out- 
right robbery of people who can ill afford to lose their money. 

I have selected a few choice extracts — for bankers — 
from the literature of the various schemes which have 
come to my notice, which I herewith submit : 

{From E. S. Dean Co. Booklet. i8p/.) 
THINK WHAT PEOPLE DO. 
By hard work, wear and tear on your brain and muscle, you earn 
money and get it by self-denial, discomfort and worriment. Then 
what do you do? Generally, you hurry and find a bank which will 
rent it from you, for say 4 per cent a year, and then your interest 
in your wealth ceases. You never think or look upon your dollars 
as assistants or money-makers, nor do you stop to think that the 
bank puts your money out to work and gets a fat salary for several 
people — Directors, Stockholders, — and pays large expense with it. 
Oh, no ! You never think of that. Look at it in a different way : 
Suppose you worked one year without getting any money, but that 
at the end of that period a $1,500 house was given to you. Would 
vou take that to the bank and let them pay you $60 a year for the 
privilege of renting it out as their own for $450 per annum ? Or, 
would you vourself put it in a real estate agent's hands and pay him 
10 per cent to rent and manage the house, and send you the rent, 
about $34 every month, or $408 a year — which is the wisest ? Think 
it over, and if you do not have a larger amount, send along $50 or 
$100 and get it to work. 

From one of the E. S. Dean Co. Circulars, 1897: 



THE DUTIES OF THE BAXKS 481 

Have you money in Savings Banks? How much do you get 
on your investment with them and when do you get it? Have 
they got a Capital of $1,000,000, and suppose the bank your money 
is in closed its doors, as hundreds of savings banks do every year, 
where would you be? Do you know how your money is placed? 
Have you any doubt about the E. S. Dean Company? Do you 
know its officers personally? You can learn for two cents, and 
know how and in what your money is invested. Can you realize 
that if the worst should come to the worst that the E. S. Dean Com- 
pan}', who operate the Dean Safe System wholly upon scientific 
principles, and which system has stood the tests of time and panics, 
should ever close its doors upon its thousands of customers, it 
would have to do so very quickly after you sent them your money 
or you would have it, and much more, drawn out and enjoying a 
home it paid for. So if you fear loss, take one calm half hour and 
reason with yourself. Let common sense and absolute facts pre- 
dominate in your mind. We have paid cash dividends every second 
week for six years. Not a man, woman or child has ever placed 
money in our Special Order Department but has received dividends 
punctually. We accept as low as $25 to open an account. Do you 
think that if vou send us $25, or in other w^ords, place $25 under 
the guidance of the Dean Safe System and get your check for three 
or four dollars on the first and fifteenth of each month, that you are 
taking chances as compared with any other investment in existence? 
Ask yourself. 



A San Francisco race track " faker's " argument: 

Bear in mind that we guarantee to pay you not less than four 
per cent weekly for every dollar you invest with us. Savings Banks 
and Mortgages average not more than four per cent annually. We 
pay this and more fifty-two times during the year. 



A St. Louis race track scheme mails a fac simile of 
a letter from a trust company of their home city, with a 
capital of $1,000,000 and surplus of $500,000, reading as 
follows : 

TO WHOM IT MAY CONCERN : 

The firm of = — — — — of this city is one of our largest 



482 GOLD BRICKS OF SPECULATION 

depositors, and we consider them amply responsible for every obli- 
gation the\' may assume. 



By 



Secy, and Trcas. 



and in addition encloses to prospective investors an elab- 
orate booklet which, among other things, has this to say: 

It is with great pride, therefore, that we can say, that never a 
week during all this time (four years) but every subscriber received 
his part of the earnings promptly, and these earnings have averaged 
for each week, greater interest than any bank or savings institution 
pays, or can pay, for a whole year's use of the same amount of 
monev. 



Another St. Louis concern says in its booklet: 

Here are a few figures that will show you what a golden oppor- 
tunity is offered you by this company. If you invest $ioo in a bank 
at 3 per cent at the end of the year you will have $103, and in order 
to do this it is absolutely necessary that your investment remain in 
the bank for the entire year. * * "•' If you invest $100 with us 
for a year you will have at the end of the year $366. 



An Ohio Gas and Oil Company has the following rea- 
sons to offer why money should not be deposited in banks : 

Don't let your money sleep by depositing in a savings bank at 4 
per cent. Those who make money fast are the ones who have the 
courage to grasp good opportunities. Put your money to work by 

investing in The Oil and Gas Company where it 

will earn 24 per cent dividend and double in value many times. 



A Springfield, Mass., " Banker and Broker " selling 
mining and oil stocks, offers the following argument 
against banks, etc. : 



THE DUTIES OE THE BANKS 483 

WHAT IS YOUR MONEY EARNING? 

Not as much as it can and ought to, if it is in a bank or out on 
mortgage. I'robably you have gone into these things because you 
think they are safe, even if the interest is small. But there is some- 
thing just as safe that can earn twice as much money for you. I am 
talking about mining, smelting and industrial securities that pay 
from 10% to 15% dividends, not counting the increased value of 
the stock itself. 

I have been particularly successful in handling such stocks. 
Been doing it for fifteen years and have the best facilities of any 
broker in the country for investing my clients' money in safe divi- 
dend-paying stocks. I have correspondents in the principal mining 
camps of the country, who keep me informed of what's going on. 
Just as quickly as I hear of an exceptionally good proposition, I 
send a mining expert to investigate. If his report is favorable I 
buy a large block of stock, usually way down in price because I 
come in at a time when the miner needs money to push development 
work. My clients get the benefit of those low prices. In that way 
I have started lots of such stocks at low prices to see them double 
and treble in value in a short time. I have quite a few mining 
propositions now that are paying dividends or nearing that stage. 
If you would like to have references before investing I shall be glad 
to furnish them. Your money is as safe with me as in a bank, and 
it's earning more. 



Banks attacked by the promoters of an industrial enter- 
prise: 

Three per cent or 4 per cent on money in a savings bank is 
better than an unsafe investment. 

But leaving money in a bank at 3 per cent or 4 per cent is pretty 
poor business for any man of average (or more than average) 
intelligence. 

The reason a bank can pay 4 per cent interest is because the bank 
can put the money where it will earn a good deal more than 4 per 
cent. And you can do the same if you take the trouble to study 
the matter a little. 

The bank gets a large middleman's profit. 

The careful investor is his own middleman. 

Certainly you can look up a good, perfectly safe way to make 



48i GOLD BRICKS OF SPECULATION 

your money earn more than 4 per cent just as well as the cashier 
of yonr bank can. 

The banker may tell you that it is best to take 4 per cent and 
" be safe/' 

But you can be sure that the banker is safe when he re-loans 
your money for 8 per cent or more. He isn't going to risk principal 
and interest to make the difference in interest. Such losses would 
wipe out very many profits. And yet large bankers become im- 
mensely wealthy. 

Put your savings bank money in companv stock 

and make 25 per cent. 

It will be just as safe as if in any bank in the country. 



Many Ijankers can recall having read signs at railroad 
stations, about as follows: 



: BEWARE OF PICKPOCKETS 

\ AND 

: CONFIDENCE MEN. 

\ DON'T TALK TO STRANGERS. 



This does not prevent pickpockets and confidence men 
from plying their vocation at the railroad station, but it 
serves as a hint to many travelers, who are thereby placed 
on their guard, and escape loss by following the hint and 
avoiding strangers, or by depositing their valuables beyond 
the reach of pickpockets. 

Bankers and store-keepers, especially in the smaller 
towns, could, by an intelligent system of constantly warn- 
ing the people to avoid schemes which promise to enrich 



THE DUTIES OF THE BAXKS 485 

them over nig'ht, keep a large percentage of the money at 
home, that now flows into the coffers of swindlers. Every 
dollar wasted by a resident of a town in an eft'ort to get 
rich quickly by some schemer's " safe method " is an indi- 
rect loss to the whole community. 



486 GOLD BRICKS OF SPECULATION 



CHAPTER IV. 

THE DUTIES OF THE GOVERNMENT. 

Inadequacy of the protection afforded the pnbHc at present ; fraud 
orders ; swindlers are bold ; punishment by fine a satire ; the 
inexhaustible corruption fund. 

That crime of so despicable a type as the cowardly rob- 
bery of the poor through the United States mails should 
flourish as do the schemes at present overrunning the 
w^hole country is a sad commentary on our laws and the 
machinery of the government for their enforcement. A 
close observer will readily discover several reasons why, in 
the face of a Federal statute prohibiting the use of the mails 
to further a scheme, it is less dangerous and more profit- 
able to violate this law than it would be to commit highway 
robbery or burglary in violation of a state statute. 

Here are a few of the reasons why there are so many 
successful schemes operated at present: 

Inadequacy of the force of postoflice inspectors. (About 
two to each million of population.) 

Inadequacy of punishment, usually a fine ranging from 
$ioo to $i,ooo, with now and then a jail sentence. 

Tlic opportunity to steal a fortune with a minimum risk 
of conviction and punishment is a strong incentive to the 
'' faker " to ply his vocation boldly and openly. 

It is the duty of the Government to adopt and enforce 
such regulations as will exclude these schemes from the 
mails. A little intelligent investigation would demonstrate 
to the postofiice department that it is feasible to appoint a 
committee of experts who could, within a short time after a 



THE DUTIES OF THE GOVERNMENT 487 

fraudulent scheme is launched, make such an examination 
into the character of its promoters and its methods as would 
justify its being declared fraudulent, and its mail being 
stopped before it could get returns sufficient to repay the 
promoters the original outlay for advertising and sta- 
tionery. 

Radical action by the Federal authorities should have 
been taken several years ago, but it is not too late to in- 
augurate a system that will protect those incapable of pro- 
tecting themselves. 

'' Fraud Orders." 

It is within the power of the Postmaster General to 
deny the use of the United States mails to firms or indi- 
viduals engaged in a fraudulent business, by issuing in- 
structions to the local postmaster prohibiting him or his 
employes from delivering to the fraudulent concern mail 
addressed to it. Upon the receipt of such an order (v/hich 
is commonly called a " fraud order "), the local postmaster 
returns to the senders all mail matter addressed to the con- 
cerns against which the order was issued, with the word 
" Fraudulent " stamped in large letters across the face of 
the envelope or wTapper. This is a very effective method 
of disposing of schemes to defraud and quickly drives 
" fakers " out of business. 

In September and December, 1896, I procured " fraud 
orders " against fifty-five firms and individuals operating 
bucketshops and '' get-rich-quick " schemes. Almost all of 
them w^ere located in Chicago. With one or two excep- 
tions, the concerns were never again heard of and none of 
them ever succeeded in establishing its legitimacy. 

Had it been possible to induce the postoffice department 
to continue this method it would have saved hundreds of 



488 GOLD BRICKS OF SPECULATION 

millions of dollars to the public, which, year after year, 
has been systematically robbed by these swindles. 

Why Swindlers are Bold. 

In order to show the inadequacy of the punishment and 
the discouragements encountered in prosecuting swindlers, 
I publish the particulars of the noteworthy case of five ras- 
cals who paid $i,ooo to the Government as a penalty for 
stealing $750,000 from the public. 

While chairman of the Bucketshop Committee of the 
Chicago Board of Trade in 1896, I unearthed one of the 
most gigantic swindling schemes since the days of '' Fund 
W," and with the co-operation of Colonel Stuart, the 
United States Postal Inspector-in-charge, ran down a dar- 
ing gang which had secured by its swindling operations at 
least $750,000. Its members were: W. H. McCLURE, 
JAMES F. McCLURE, DR. JOHN CRAIG, WIL- 
LIAM A. THOMAS and JOHN I. TALLMAN. 

The gang had been operating a pretended commission 
business in grain and stocks and booming fictitious mining- 
shares. It changed the name of the firm every month or 
two and had at different times had its offices in the Rialto, 
Omaha and Commerce buildings, Chicago. It did busi- 
ness under the following names and firm titles : 

CRAIG & CO. 

PATTISON & CO. 

THOMAS & CO. 

JOHN I. TALLMAN & CO. 

AMERICAN COMMISSION CO. 

PRICE & CO. 

J. E. MORGAN & CO. 

LA BELLE MINING & MILLING CO. 

It conducted its own printing office at 85 Fifth avenue 



THE DUTIES OP THE GOVERXMENT 489 

(Chicago), and sent tons of mail matter through the post- 
office. 

I had the men marked for arrest more than six months 
before they were taken into custody, but the ramifications 
of their scheme were so extensiye that I reahzed that I 
was on the track of a gigantic swindle. I wanted more 
time to run them down. While the first eyidence was se- 
cured January 2^, 1896, and was the basis of the complaint 
made before the United States Commissioner, it took six 
months to uncoyer the full extent of the scheme. William 
H. McClure, the leader of the gang, had a record as a lot- 
tery swindler, and he was ably seconded by his brother 
James, and his brother-in-law. Dr. John Craig. 

For ingenuity and daring, the operations o-f this gang 
read like a romance, and from its yarious confidence 
schemes it reaped large fortunes. The ringleader came 
from a respectable family. He was for many years a rail- 
way postal clerk on a line running out from St. Louis. 
Dr. John Craig, formerly of Guthrie, Oklahoma, w^as his 
brother-in-law. James F. McClure was his younger 
brother. All three men were " sooner s " in Oklahoma, 
where they formed the acquaintance of one William A. 
Thomas, who began his life as a bank clerk in Abingdon, 
Illinois. He became cashier of a bank at Edwardsyille, 
Kansas, and assisted in the organization of the Capital 
City Bank of Guthrie, Oklahoma. After receiving $15,000 
in deposits he and the president borrowed the entire de- 
posits and left their worthless notes as security. The 
bank failed and the depositors lost eyerything. John I. 
Tallman was for fifteen years a railway postal clerk, and 
is supposed to haye formed the acquaintance of the others 
in Oklahoma. 

W. H. McClure blossomed into prominence as the pro- 



490 GOLD BRICKS OF SPECULATION 

prietor of a bogus lottery, with headquarters in Kansas 
City, Kansas. The scheme was to send out tickets indis- 
criminately, promising to let anyone who would sell fifty 
of his tickets and remit $37.50 draw $5,000. No one ever 
got the $5,000 or any part of it. In order that the 
plan might have the proper backing, he used the name of 
A. B. Armour & Co. on his lottery tickets. His ingenuity 
is apparent only when the fact is known that there were ' 
two Armours in Kansas City (K. B. and A. W.), and that 
he took an initial from each of these names, making it 
A. B. Armour & Co. He disappeared from Kansas City, 
forfeiting his bond by failing to appear for trial. 

Next he and his companions went to Wichita, Kansas, 
and began to operate a second lottery, using the name of 
Waldo Flood, claiming to have headquarters in New York, 
Wichita and San Francisco, using the com1)ination of 
Waldo of New York, and Flood of San Francisco. They 
were driven from Wichita and next opened in New Or- 
leans, where they got up the celebrated forgery of the 
tickets of the Lo'uisiana Lottery. They distributed these 
forged tickets broadcast, sending a hundred and fifteen 
in each package, and in a confidential letter to the party 
who received the tickets they promised that on the receipt 
of $100 a special ticket in the lot would be guaranteed to 
draw $4,000. 

They returned to Kansas City and offered one hundred 
lottery tickets for $75, guaranteeing that the purchaser 
would draw $10,000. On the day of the drawing they 
wired six hundred of their dupes that they had drawn the 
$10,000, and requested the remittances be made promptly, 
and most of the dupes sent in their $75 each. In their 
various lottery schemes they never had a drawing. They 



THE DUTIES OF THE GOVERNMENT 491 

paid no prizes ; nor was there a single fair or decent feature 
about them. 

After the fall of the lottery business they came to Chi- 
cago and began business under various aliases as bankers 
and brokers, sending their enticing circulars through the 
mails and advertising largely in country newspapers. 
Their customers were solicited to send money and orders 
to buy and sell grain. The gang would receive the re- 
mittances, and if they were ordered to buy, they would 
take the highest market quotations of the day on which the 
order was received, and as the market nearly always fluctu- 
ated sufficiently during the day to wipe out a margin of 
seven-eighths of a cent, they would immediately report to 
their dupes that they had bought, say, at 58 cents and that 
the market had declined to, say, 573/^ cents. Thus the 
innocent was " ticked out." In other words, their cus- 
tomers all lost their money before the gang received it. 
At no time did any of their customers make a penny. 

These five enterprising citizens were duly indicted by 
the Federal grand jury, and should have suffered a severe 
penalty, but, upon entering a plea of guilty, they escaped 
with a fine of $200 each. Quite a profitable and safe 
venture ! 

To punish the swindler by fine is a satire on justice. 
He walks into court with another man's money in his 
pocket, the fruits of his crime. He divides the spoils with 
the Government and the victim is in no way avenged. 
Neither are the ends of justice satisfied. This class of 
men have none of the finer feelings that a conviction and 
fine would shock. Loss of liberty might deter them for a 
time from plundering the pockets of susceptible persons, 
but so long as they are merely forced to give up part of 
their plunder, they escape real punishment. The courts 



492 GOLD BRICKS OF SPECULATION 

should recognize the fact that the fine is a sort of hcense 
or permit and nothing more. 

Congress should make laws that will protect the public. 
Every citizen should not be called upon to be a trained 
sleuth in order to escape being swindled. The people have 
a right to demand that prompt and severe penalties be im- 
posed upon those who rob them through the mails. The 
mail service is an open door to the sacred precinct of the 
home, to the tradesman's store, and to the desk of the 
professional man. It puts the swindler's plausible scheme 
with its insinuating suggestions of immediate wealth be- 
fore ten thousand persons in one day; nine thousand and 
nine hundred of the recipients either have been to experi- 
ence's school or are not lacking in common sense, and con- 
sign the flashy literature to the waste baskets; the other 
one hundred find the prospect of immediate enrichment too 
alluring to be resisted. Many of the latter do, beyond 
doubt, possess ordinary good judgment and caution and a 
knowledge of the possibilities of gain in legitimate enter- 
prises, but the mania for rapid wealth-getting, with which 
the American people have become so profoundly affected, 
is concentrated in this one per cent of the population which 
contributes the " swag " for the swindler to decamp with. 

The recent scandals in the Postofflce Department in 
connection with '' get-rich-quick " schemes are known and 
have been widely published. Pending the trials of the in- 
dicted persons I do not believe it would be proper for me 
to comment on them, further than again to remind the 
public and all honest officials of the great discouragements 
attending the prosecution of swindlers. I have called at- 
tention to the vast sums spent by swindlers for blackmail. 
After an experience of ten years, and speaking on the 
strength of that experience, I have no hesitancy in making 



THE DUTIES OE THE GOVERNMENT 493 

the statement that the '' inexhaustible corruption fund " 
of the bucketshop-keeper and other swindlers must be 
given due consideration by those who seek to abolish the 
evil either by criminal prosecutions or by the enactment of 
laws. I have almost invariably found the money of the 
swindler making a strong " argument '' in his behalf. 
Notorious but rich bucketshop-keepers when employing 
counsel, always give the preference to the la\v firms of 
United States Senators and Representatives. 



40i GOLD BRICKS OF SPECULATION 



CONCLUSION. 

I have about completed this work, which for ten months 
has occupied what would otherwise have been my leisure 
moments. I expect that it wall reach the public within a 
year from the time I conceived the idea of endeavoring in 
my crude way to show the true functions of speculation 
on produce Exchanges, to make known my experiences, 
and to unfold w^ithout any embellishments the methods 
used to deceive and plunder the people. It has been un- 
necessary for me to stray from fact, as my information 
and investigations have been so far from superficial and 
the facts have been so tragic, that I have recognized how 
absurd it would be and how detracting in interest to the 
reader to give other than the real circumstances. 

I believe I have made plain the true functions of specu- 
lation in farm products, as well as the facilities provided 
by the Exchanges for the handling of future delivery con- 
tracts. Exchange methods are criticised as a result, to 
some extent, of their own carelessness, but more generally 
by reason of the almost universal error of confusing 
bucketshops and *' get-rich-quick " schemes with legitimate 
interests. It is my belief that there are proportionately as 
many successful speculators among those who adopt the 
occupation and follow it intelligently, as there are mer- 
chants and professional men. The '' plunger " and the ill- 
balanced man fails in speculation just as he would in any 
other pursuit. Man is liable to be intemperate. He may 
over-eat ; he may over-drink, and he may over-speculate. 

If I should try to defend over-speculation in wheat, 



C0NCLUS10\' 495 

cotton, stocks, real-estate, or anythin^^ else, I should l)e 
lacking* in acumen. There is nothing" so dangerous to the 
Exchange memher as over-trading on the part of either 
his customer or his fellow-memher. There is no phase of 
the l)usiness that is more carefully guarded against on the 
Exchange, where its dangers are recognized. The legiti- 
mate hroker endeavors to prevent over-speculation on the 
part of his clients, as he shares the danger by reason of 
his having the contracts open for his customers with other 
members of the Exchange. 

The bucketshop encourages over-speculation. It is a 
quick method of getting the customer's money, for what 
the customer loses the bucketshop wins. Therefore, it en- 
courages liberal trading on narrow margins, so that it 
can claim the money on the first slight change in the 
market against the customer. 

Over-speculation is an attempt to do too much business 
on a given amount of capital. Legitimate brokers guard 
against it; bucketshops encourage it; both act from selfish 
motives. 

I have found that it would be impossible, in one volume, 
to recite all the phases of the swindlers' games or to cover 
more than a limited number of the great variety of the 
schemes of financial sharks that are so successfully oper- 
ated in this country. I believe, however, that I have made 
a sufficient exposition of the rogues and their methods to 
demonstrate that robbery by deception is practically a 
science. The comparative immunity enjoyed by them en- 
courages men of keen intellect and easy consciences to de- 
vote their lives to the study of swindling. 

In every community, large and small, from the lakes 
to the gulf, and from ocean to ocean, can be found the 
victims of the bucketshop and the '' get-rich-quick " 



496 • GOLD BRICKS OF SPECULATION 

swindlers. Recently one mail brought me three complaints 
of losses aggregating $i,ooo through a Chicago firm of 
*' fake " bankers and brokers. One complaint was from 
California, one from New York and one from Florida. 
Thus they covered the Nation from center to the sides. 

They breed widespread iiiisery and 7i'aut. 

TJiey create emhezders and defaulters. 

They leave open for many the choice of but tzvo fates, — 
the suicide^s grave, or, wliat is worse, the penitentiary. 
They drag young men dozvn from honest occupations to 
their ozvn level, thus increasing the horde of szvindlers 
each year. 

Minnesota, our fair sister Commonwealth, the haven 
of the thrifty Scandinavian, whose industry has placed her 
at the head of the wheat-producing states of the Union, 
gives us a tragedy so new, so significant, so instructive 
and yet so similar to the numberless other tragedies chron- 
icled with alarming frequency by the press of the country, 
that although it comes to me at the moment I am com- 
pleting this book, the lesson that it contains for the great 
State of Minnesota, particularly, and for the Nation, gen- 
erally, prompts me to devote a little space to it. 

Just prior to August 15, 1903, two cases of embezzle- 
ment occurred among bank employes, which attracted my 
attention. One was the case of a bank cashier in Ohio, 
who had stolen the money of the bank and squandered it 
trying to beat a bucketshop-keeper's game. An impossible 
task ! The other was the case of a bookkeeper of a Duluth 
bank who had looted the institution and put all the funds 
up against the other fellow's '' sure-thing " scheme. 

As the political influence of bucketshops in Ohio is 
great, and their profit of sufficient magnitude to permit 
their indulging in many extravagant luxuries, among 



CONCLUSION 49T 

which is the employing" of a United States Senator's law 
firm to defend them and their methods, it is more than 
probahle that little will be heard of the Ohio case. But 
there will be echoes from the Minnesota case. The Dtiluth 
Herald said : " There is much severe condemnation for 
the bucketshops from all sides." 

The story is brief: 

A young man of correct habits, the son of a prominent 
and respected citizen of Duluth, is employed as a book- 
keeper in a bank. He takes $48,500 of the bank's funds 
and passes it into the coffers of two bucketshops. His 
crime is discovered ; the bank is ruined and closes its doors. 
The arrest of the young man follows. He is thrown into 
jail. He is a self-confessed embezzler. His family must 
bow their heads in humiliation. His employer, who had 
trusted him '' as he would one of his own boys," is ruined 
financially. 

Why is Minnesota in the grasp of the bucketshop octo- 
pus ? Wlw are its young men ruined ? Why are its liomes 
made desolate? Why are its banks looted? 

Let us look backward: 

A bill prohibiting bucketshops within the State of Min- 
nesota is introduced into the legislature at St. Paul in the 
early days of March, 1903. It passes the Senate without 
debate. It then goes to the House and is defeated. It had 
" run up against something." Can it be possible that the 
"loot" from the Duluth bank "aided" to kill the bill? 
Why should a legislator vote against a bill directed against 
the nefarious practices of financial sharks ? There is only 
one true answer, notwithstanding many plausible excuses 
and arguments. Such of us as have experienced the humil- 
iation of being forced to witness the bartering of votes in 
law-making bodies know the answer well. 



49S GOLD BRICKS OF SPECULATION 

LET US THINK! 

I left the Duluth young man in jail. A reporter vis- 
ited him early in the morning after the first black night. 
He had had time to think. He said: 

'' I have l)ecn sitting here all night thinking it over and the more 
I think, the more I am convinced that negligence in the bank and 
unlawful encouragement in the bucketshops are deeply responsible." 

Thus spoke the embezzler through the grating of his 
cell door: 

" / have been sitting here all night thinking it over." 

:|: i\i ^ -\i ^ :!; * 

" 1 HAVE BEEN SITTING HERE ALL NIGHT THINKING IT OVER." 
* ^ -^ * * * * 

In peering into the future, let us also look backward. 



THE END. 



IAN 9 1904 



